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U.S. judge: GM doesn't have to order customers to park recalled cars

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Bloomberg News Service report

DETROIT (April 18, 2014) — General Motors Co. doesn’t have to take the unprecedented step of telling car owners that 2.59 million vehicles it recalled are unsafe to drive until faulty ignition switches are fixed, a federal judge has ruled.

U.S. regulators are better able than courts to tell the auto maker how to manage its recall, U.S. District Judge Nelva Gonzales Ramos held April 17 in Corpus Christi, Texas.

The request for a so-called park-it order was made by the owners of a 2006 Chevrolet Cobalt who sued GM for the lost value of their car. They said the order was the only “fail-safe solution” until defects in the Cobalt and other small-car models linked to 13 deaths are fixed. The judge said she denied the plaintiffs’ request in part because they didn’t need the order to advance their lawsuit against GM.

“GM pushed to win this hearing on a technicality,” said Bob Hilliard, a Corpus Christi-based lawyer for the plaintiffs. “There’s no doubt had they agreed with me and done this voluntarily, lives would have been saved.”

Kevin Kelly, a spokesman for GM, said the company respects the court ruling.

The ruling comes a day after other plaintiffs sued the embattled auto maker in California in what may be the first complaint naming Continental Automotive Systems U.S. Inc., the Michigan-based maker of air-bag systems used in the defective GM vehicles, as a defendant.

Was Continental aware of defect?

The litigants in that case claim Continental was aware of the ignition switch defect as early as 2005, and did nothing to redesign the allegedly defective air-bag system so that it would remain active after a car key moved out of the “run” position.

A spokeswoman for Continental said the company had not yet seen the lawsuit, “so we cannot comment at this time.”

In the Texas park-it case, the judge had asked GM to explain why she shouldn’t require it to recommend motorists keep their faulty cars off the road. No judge has ever required an auto maker to send such a notice for recalled vehicles, GM lawyers said.

GM, which failed to correct the defect known to some of its engineers for at least a decade, faces at least 37 lawsuits, most of which are proposed group suits, over the ignition switches. Congress and the National Highway Traffic Safety Administration (NHTSA) are also probing the company. CEO Mary Barra told lawmakers that the cars are safe to drive with precautions.

Reliable evidence

GM said in a court filing that consumer lawyers didn’t provide reliable evidence the recalled models are unsafe if drivers follow issued recall directions that include removing heavy objects from key rings. A court-mandated park-it notice would undermine the procedures that Congress intended for recalls, according to GM.

GM said April 10 that it expects to take a first-quarter charge of $1.3 billion, mostly for the cost of recall-related repairs. Those expenses, up from an earlier estimate of $750 million, may lead to the auto maker’s first quarterly loss in more than four years. About 2.2 million of the recalled vehicles are in the U.S.

GM is trying to freeze some of the ignition switch lawsuits it faces, including the one overseen by Judge Ramos, until a decision is made whether similar litigation should be combined, and where it should be handled.

On April 17, the company alerted Judge Ramos that a judge in California has delayed two cases against the car maker.

In the new complaint filed there, Continental was sued because the company was allegedly aware of the ignition switch defect as early as 2005, when GM met with Continental officials in the investigation of a crash of a 2005 Chevrolet Cobalt. Continental did nothing to redesign its air bags so that they would deploy even if the car’s power went out, nor did it warn NHTSA or the public, the plaintiffs contend.

The complaint naming Continental was combined with a March 24 complaint filed by Galdina Maciel of Sonoma County, Calif., which is being handled by the same lawyers. GM has said that at least 37 suits similar to Ms. Maciel’s are pending against it in various courts. All claim economic damages for the decline in the cars’ value as the defects became widely known.

GM said this week that its 2009 bankruptcy freed it from liability for damages and design defects, affecting the validity of the suits. It said it would soon ask a U.S. bankruptcy judge in New York to reaffirm the order that spells out what it can and can’t be held liable for.

Continental, however, wouldn’t be protected by any such ruling.

This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.

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