GM Asks Courts for Protection Because It Technically Became a New Company in 2009
As the pressure continues to mount for General Motors over its ignition switch recall, the company has asked a judge to delay action on the ignition lawsuits.
As the pressure continues to mount for General Motors over its ignition switch recall, the company has asked a judge to delay action on the ignition lawsuits until a panel on multidistrict litigation rules whether the 30 cases can be combined and a bankruptcy court decides whether the claims violate GM’s 2009 bankruptcy order.
Back during GM’s 2009 bankruptcy case, an order was given to split the company into two separate entities. “Claims from before the bankruptcy would go to ‘Old GM,’ called Motors Liquidation Co.,” the Associated Press writes, “while claims after the bankruptcy would go to the new General Motors Co.”
Kate Cox over at The Consumerist explains further:
Under the terms of that 2009 restructuring, GM is technically a different company and legal entity than it was before. Things were shifted around such that “new GM” had the assets — the parts of the company that could be rescued and made profitable again — and that “old GM” maintains the liabilities. Those liabilities not only include debts, but also responsibility for company actions that took place prior to 2009.
The lax regulations leading to the ignition switch recall would almost certainly be put in the pre-2009 pile. Last week, two GM engineers were placed on leave because of conscious decisions made to not fix the defect. Critics say that the new GM is trying to hide behind its bankruptcy ruling in order to shed liability for its improper safety standards before 2009—a tactic made more galling given the fact that the automaker received bailout money from the government.