GM Will Pay Claims for Defective Ignition Switches

CEO Mary Barra made this statement:

We are pleased that Mr. Feinberg has completed the next step with our ignition switch compensation program to help victims and their families. We are taking responsibility for what has happened by treating them with compassion, decency and fairness. To that end, we are looking forward to Mr. Feinberg handling claims in a fair and expeditious manner.

Feinberg will begin accepting claims August 1, and the compensation claims must be received by December 31, 2014. Feinberg is using a formula to determine compensation amounts, but there is no limit on the amount of a single compensation payment or on the total amount GM will pay. Even victims and families that have already been compensated may return for additional payment.

The weight of the key ring, perhaps coupled with road conditions, may have caused the ignition switch to be jarred from the “run” position, turning off the engine and shutting down the car’s electrical power, which causes the airbags to fail to deploy. The defective switches were used on as many 2.6 million cars and 10 different models from 2003 to 2011.

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GM has so far collected evidence of 3,500 claims involving cars with the defective switch, but the claims have not yet been reviewed to determine whether a claim meets the program’s requirements. GM has attributed at least 13 deaths to the defective switch.

Feinberg said that there are two key elements that will determine the validity of a claim: 1) is it the right model car, and 2) did the airbag deploy at the time of the crash? If the airbag did deploy, then Feinberg concludes that the vehicle’s ignition switch was not defective and thus GM will not pay the claim. Feinberg also said that claims would be paid even if the driver was drunk or texting at the time of the crash.

Anyone who files a claim and accepts a payment gives up the right to sue. Punitive damages will not be paid from this process. An FAQ is available that explains the program, and GM will soon have a website and a toll-free telephone assistance number available.

The news was not unexpected by investors and the stock price has barely moved, down fractionally at $36.60 in late-morning trading Monday. The 52-week range is $31.70 to $41.85.

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