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Business News/ Companies / GM receives 125 death compensation claims on ignition switch
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GM receives 125 death compensation claims on ignition switch

GM lawyer said families in 19 of those cases will get a payout, while the remaining cases are still being vetted

Figures released on Monday showed 445 claims to the compensation fund have been made so far, including 58 involving serious injury and 262 involving hospitalization. Twelve of those injury claims have been ruled valid. Photo: AFPPremium
Figures released on Monday showed 445 claims to the compensation fund have been made so far, including 58 involving serious injury and 262 involving hospitalization. Twelve of those injury claims have been ruled valid. Photo: AFP

Washington: General Motors Co. (GM) has received 125 claims of fatalities so far related to defective ignition switches in its cars, according to the first batch of applications to a victims’ compensation fund.

Kenneth Feinberg, the lawyer hired by GM to determine which requests are valid, said families in 19 of those cases will get a payout, while the remaining cases are still being vetted. GM has so far discussed only 13 fatalities connected to the defective switches, which could be inadvertently shut off when jarred, cutting power to the engine and deactivating air bags.

“GM was asking its engineers can you definitively say ignition switch defects caused the accident," Feinberg said in a Bloomberg Television interview on Monday. “Our standard, as you know, is much more liberal. It’s easier to apply. It’s a legal standard, was the ignition switch the proximate cause, a substantial likelihood as the cause of the accident."

Feinberg said he expects the fatality tally to increase as more claims come in, though he wouldn’t give an estimate as to how high. He also declined to speculate how much GM could pay out. The auto maker, the largest in the US, said in July it was setting aside $400 million to $600 million to pay victims.

“We’re just now beginning to make the dollar calculations," Feinberg said. “We’ll see whether claimant, the victim, or his or her family will accept the money. It’s a little early to be putting dollar signs next to eligible claimants. We’ll know more about that in the next four to six weeks."

Pedestrian injury

“GM will abide by whatever determinations Feinberg makes," said Dave Roman, a spokesman for the Detroit-based auto maker.

“Ken Feinberg and his team will independently determine the final number of eligible individuals," Roman said. “What is most important is that we are doing the right thing for those who lost loved ones and for those who suffered physical injury."

Figures released on Monday showed 445 claims to the compensation fund have been made so far, including 58 involving serious injury and 262 involving hospitalization. Twelve of those injury claims have been ruled valid.

GM’s ignition-switch recall began in February and expanded to about 2.6 million cars, including the Chevrolet Cobalt and Saturn Ion.

GM’s official tally only includes the drivers, Feinberg said. The compensation fund uses a broader legal definition that makes more people eligible for payment, including the occupants of other vehicles and pedestrians if they were struck by a car with a defective ignition switch, he said.

Modest claims

The first claims were accepted on 1 August, and Feinberg will take claims through the end of the year. The more clear-cut claims will be processed within 90 days, Feinberg said. It will take 180 days to work through more complicated cases.

GM rose 1.1% to $33.63 at 4pm New York time. The shares lost 19% this year through last week.

Feinberg has administered victims’ compensation funds before, including payouts related to the 11 September terrorist attacks, the Boston Marathon bombing and the BP Plc oil spill.

The number of claims coming in for GM is “relatively modest," Feinberg said, compared with other victims’ funds. That may be partly due to some of the crashes having happened almost a decade ago, he said. Past funds he managed were set up only a few months after the disaster to the start of the compensation programmes.

Family feuds

He said it will take families more time to gather all their records for the GM claims, including police reports and old repair records. There may not be a car or black-box data, so many of the cases are circumstantial.

Another obstacle for paying claims is agreement among family members about who should receive the money, Feinberg said. Families with valid claims that can’t agree on how to divide the funds will end up in court, he said.

Even though compensation programmes attract lots of claims of varying validity, GM has consistently underestimated the breadth and severity of the ignition switch problem, said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

The company “most likely is underestimating the amount it will pay under its compensation programme," Ross said. “It also has underestimated the time and expense of sorting qualifying from unqualifying claims."

NHTSA role

An internal investigation showed that the company for at least a decade failed to promptly resolve mounting complaints from consumers, dealers and others about abnormal crashes in the Cobalt and Ion and later replaced the faulty ignition switch without alerting the public or changing the part number as required.

The US National Highway Traffic Safety Administration (NHTSA) also has been under scrutiny for missing signs of the broader ignition-switch failures and passing on opening a formal defect investigation in 2007 and again in 2010. NHTSA Acting Administrator David Friedman is scheduled to appear before a Senate subcommittee hearing on Tuesday.

Chief executive officer Mary Barra has been before congressional panels four times this year to answer questions about GM’s recalls.

Feinberg made clear he won’t be making a recommendation to GM about claims outside the models in his compensation programme: the Chevrolet Cobalt and HHR, the Saturn Ion and Sky, and the Pontiac G4, G5 and Solstice. Outside the US, the Pontiac Pursuit, the Daewoo G2X and the Opel/Vauxhall GT are covered. GM this year has recalled 16.5 million cars in North America for ignition-related defects.

“GM ultimately will have to decide going forward whether it’s comfortable with this protocol, whether it should be expanded to other vehicles," Feinberg said. “That’s completely GM’s call." Bloomberg

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Published: 16 Sep 2014, 08:47 AM IST
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