GM Defeats Consumer Court Bid to Force Recall Cars to Be Parked

Apr 18, 2014 12:01 am ET

April 18 (Bloomberg) -- General Motors Co. doesn’t have to tell car owners they should park the 2.59 million vehicles it recalled over faulty ignition switches, a federal judge ruled, rejecting a bid for what would’ve been an unprecedented order.

U.S. regulators are better able than courts to tell the automaker how to manage its recall, U.S. District Judge Nelva Gonzales Ramos ruled yesterday in Corpus Christi, Texas. The decision came a day after the embattled automaker was sued in California in what may be the first complaint naming as a defendant Continental Automotive Systems US Inc., the Michigan- based maker of air-bag systems used in the defective GM cars.

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.

Continental Automotive

The plaintiffs in the California case claim Continental Automotive, a unit of Hannover, Germany-based Continental AG, 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.

Adding Continental to the litigation against the largest U.S. automaker creates an alternative avenue for plaintiffs to seek damages because GM’s 2009 bankruptcy reorganization may shield the carmaker from liability for the claims. Customers argue they wouldn’t have paid as much as they did for the cars or not bought them at all if they had known about the defects.

25 Drivers

The complaint filed two days ago in federal court Santa Ana was brought by 25 drivers of GM models who seek to represent a nationwide class of people who bought a 2005-2010 Chevrolet Cobalt, a 2006-2011 Chevrolet HHR, a 2006-2010 Pontiac Solstice, a 2005-2010 Pontiac G5, a 2003-2007 Saturn Ion, or a 2007-2010 Saturn Sky.

Kathryn Blackwell, a spokeswoman for Continental in Auburn Hills, Michigan, declined to immediately comment on the lawsuit.

GM spokesman Greg Martin had no comment on the case.

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 are also probing the company. Chief Executive Officer Mary Barra told lawmakers that the cars are safe to drive with precautions.

The Detroit-based automaker 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.

Recall Charge

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 automaker’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 Ramos, until a decision is made whether similar litigation should be combined, and where it should be handled.

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 wouldn’t be protected by any such ruling.

The Texas case is Silvas v. General Motors LLC, 14- cv-00089, U.S. District Court, Southern District of Texas (Corpus Christi). The California case is Saclo v. General Motors LLC, 14-cv-00604, U.S. District Court, Central District of California (Santa Ana).

--With assistance from Margaret Cronin Fisk in Detroit, William Barlow in Princeton, Laurel Calkins in Houston and Tiffany Kary in New York.