GM Reaches Deal With 'Old GM' Trust on Ignition-Switch Defense Costs
August 17 2017 - 11:31AM
Dow Jones News
By Mike Colias
General Motors Co. has reached an agreement with the trust set
up to oversee its bankruptcy claims that likely thwarts lawyers'
efforts to extract an additional $1 billion from GM to settle
claims stemming from faulty ignition switches.
Last week, the trust for creditors of so-called Old GM reached a
proposed settlement with plaintiffs' lawyers that sought $1 billion
in GM stock to help settle claims related to the defective
switches. GM called the agreement an "improper scheme" to force the
auto maker to pay for baseless claims.
In a court filing late Wednesday, GM and attorneys for the Old
GM unsecured creditors trust said that they have reached a
tentative agreement that calls for GM to reimburse legal costs the
trust incurs to defend ignition-switch cases. In return, the trust
agreed to drop the proposed settlement with plaintiffs' lawyers,
which could have triggered a $1 billion payment from GM.
The settlement is the latest twist in legal wrangling begun more
than three years ago, when GM recalled roughly 2.6 million older
cars with ignition switches prone to slipping from the run
position, potentially cutting power to air bags and other safety
features. The defect has been linked to 124 deaths and led to GM
paying more than $2 billion in settlements with federal
prosecutors, shareholders and thousands of consumers.
Still unsettled is more than $10 billion in legal claims from
accident victims and customers who blamed the defect for lost
resale values, according to figures cited in court documents. Under
the settlement outlined Wednesday, which must be approved by a
bankruptcy court judge, GM will pay the Old GM trust legal costs
associated with defending those cases.
Last week's tentative settlement between the Old GM trust and
plaintiffs' attorneys would have accepted those $10 billion in
claims. That could have led to a roughly $1 billion stock payment
from GM under a complex formula in the auto maker's 2009
bankruptcy-sale order that triggers payments to the trust when
claims exceed a certain amount.
"Now the focus can return to where it belongs, which is the
merits of the plaintiffs' remaining claims," GM said in a
statement.
Steve Berman, a plaintiffs' lawyer at Hagens Berman Sobol
Shapiro LLP involved in putting together last week's tentative
agreement with the trust, said he couldn't immediately comment.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
August 17, 2017 11:16 ET (15:16 GMT)
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