A new lawsuit has been filed against General Motors (GM, Financial) stating that they should compensate millions of cars and trucks owners for the deadly damage it has created due to defective ignition switches. The compensation is almost around $10 billion. What implications would it have on the company, in case it has to bear such costs? The Detroit automaker’s woes seem endless. Let’s take a sneak peak at the matter.
A Closer Look
The complaint was filed with the Federal Court in Riverside, California. It is a 71-page complaint which covers the vehicles sold after General Motors bankruptcy proceedings. As many as 20 million cars of General Motors have been recalled due to defective ignition switches. The largest American automaker did not pay any heed to the complaints of people all this while, and it resulted in loss of life and property. The resale value of the General Motors vehicles have come down by $500 to $2600 after the complaint was registered.
The lawsuit over General Motors recall is backed by a law firm called Hagens Berman Sobol Shapiro. The case filed is a different one because it individually doesn’t focus on General Motors, but it targets the company that has caused it older model vehicles to lose its resale value between $500 and $2600. First of all, they are trying to force the General Motors to pay to those 15 million cars and truck owners whose vehicles were recalled. There’s no denying that the lawsuit has been very disturbing for General Motors, and is affecting its reputation in a big way.
The plaintiff for the case is Anna Andrews, who resides in California and owns a Buick LaCrosse. She says that if she knew about the defects of the cars owned by General Motors she would have either paid less for the car or would not have bought it altogether. Her lawsuit will claim an action for all those people who have owned General Motors car bought between July 10, 2009 and April 1, 2014.
General Motors is the top carmaker of the US and one of the leading automakers across the globe. This is why while discussing recalls they are using mild words such as “failed” or “bad”. Over the years, the company has worked hard to build its reputation, and event as these put a blemish on the hard earned position. The tone is kept mild to ensure that a negative impact is not created on the company. Last year the company had earned $3.8 billion but the amount of compensation is much high as compared to the earning. Obviously, this is an issue of concern for the company.
Parting Thought
General Motors is facing a tough time now. The ongoing recalls are adding on to the cost of the company, but more importantly affecting the company’s image which is priceless. This is very well reflected in the downward movement of the share price of General Motors. 13 deaths and 54 crashes have been reported with General Motors. If the company looked in to the matter with seriousness before only then all these mishaps could have been avoided. It wouldn’t have had to pay such a huge price. Repairing costs associated to recalls would have a bearing on the earnings per share for this fiscal year. Investors could keep their fingers crossed for the rest of the year.
