(Updates with rental program in 10th paragraph. For more on the recall, see TOP EXT9 <GO>.)
April 3 (Bloomberg) -- General Motors Co. will have to tell owners of 2.59 million recalled small cars to “park it” if customers suing the automaker convince a judge faulty ignition switches linked to 13 deaths make them too dangerous to drive.
U.S. District Judge Nelva Gonzales Ramos in Corpus Christi, Texas, is set tomorrow to consider forcing the company to adopt what the customers call a “fail-safe solution” to prevent further accidents while the switches are replaced.
The request for a park-it order was made in connection with a proposed class-action lawsuit seeking as much as $10 billion for the lost value of Chevrolet Cobalts and other small-car models recalled this year. GM is facing lawsuits by car owners or investors in Michigan and California, among other states, as well as lawsuits involving injuries and deaths as it seeks to address criticism it knew of the defect for at least a decade and failed to correct it.
GM Chief Executive Officer Mary Barra fielded pointed questions and accusations from Congress this week, with one senator saying GM had a “culture of coverup” and another predicting it may face criminal liability. GM focused on costs in the past and now makes the customer “our compass,” she told House and Senate members probing GM’s conduct.
Barra met at the company’s Washington offices with families of accident victims. Barra circled the table and shook hands with each of the 22 family members, apologizing personally and as CEO, and listening to each of their stories of loss, according to Bob Hilliard, an attorney for plaintiffs in two lawsuits against the Detroit-based automaker who organized the session.
Asked by families at the meeting about the possibility of a park-it warning, she said the cars can be driven safely, Hilliard said in a phone interview after the meeting.
GM faces an investigation by the National Highway Traffic Safety Administration and, according to a person familiar with the matter, a criminal probe. Vehicles from the mid-2000s with the defective switches include some Chevrolet HHRs as well as Opel, Pontiac and Saturn models.
At least 15 lawsuits have been filed in federal courts by owners of the recalled models who seek to represent other GM customers in class-action cases alleging they wouldn’t have bought the cars, or paid less for them, had they known about the defect.
Lawyers in one of those lawsuits are seeking to have the cases consolidated and handled by the judge overseeing Toyota Motor Corp.’s sudden-acceleration litigation, which resulted in a $1.63 billion settlement. U.S. District Judge James Selna in Santa Ana, California, is uniquely experienced and positioned to manage the GM case, according a request to consolidate the lawsuits filed with the Judicial Panel on Multidistrict Litigation in Washington.
In Santa Ana, lawyers asked Selna to order GM to notify its customers in California that they are entitled to a free rental vehicle while they wait for their ignition switches to get fixed.
“Many drivers do not know about the free rental car option and are left to choose between continuing to drive the defective vehicles or paying for rental cars while they wait for GM dealerships to have enough parts on hand for repairs,” Girard Gibbs LLP said in a statement yesterday.
In the Corpus Christi case, Charles and Grace Silvas, who own a 2006 Cobalt, sued GM March 14 for allegedly concealing the defects and reducing the car’s resale price because the engines can stop running if the key is jostled or weighed down. They seek to represent other vehicle owners in a class action, or group lawsuit.
“While GM proposes partial fixes, additional incidents of ignition switch failures will certainly occur,” the plaintiffs said. “Injuries and fatalities are the inevitable consequence of such additional accidents.”
Today, Hilliard’s firm said he had e-mailed Barra telling her it was “time to act” by grounding defective cars nationwide.
Hilliard’s other lawsuit against GM, filed March 21 in Hennepin County District Court in Minneapolis, is for wrongful death.
Megan Phillips, 17, was driving a 2005 Chevrolet Cobalt with two friends in Wisconsin when the ignition switch moved to the “accessory” position and cut power to the engine, according to the complaint. The Cobalt veered off the road, hit a telephone junction box and two trees and the air bags didn’t deploy, according to the complaint. Phillips was seriously injured and her two passengers were killed, according to the suit.
Hilliard said in an interview that his clients are seeking $50 million to $100 million, plus punitive damages. The suit accuses the carmaker of negligence in designing and manufacturing the switch, Hilliard said.
GM has declined to comment on lawsuits, saying it is focused on ensuring its customers’ safety and peace of mind.
Barra said again yesterday that the recalled models are safe to drive while owners await the new parts, as long as the ignition key isn’t weighed down with additional keys or other items on the ring. She said she would let her son drive one, if it had only the key by itself, per GM’s and NHTSA’s recommendations.
GM has said it faces $750 million in first-quarter charges for recalls, including repair and rental costs.
GM rose 1.2 percent to $35.28 at 2:52 p.m. in New York trading. The shares have declined 14 percent this year.
The case is Silvas v. General Motors LLC, 14-cv-00089, U.S. District Court, Southern District of Texas (Corpus Christie).
--With assistance from Patrick G. Lee in New York, Tim Higgins in Detroit, Joel Rosenblatt in San Francisco and Edvard Pettersson in Federal court in Los Angeles.