The General Motors Scandal May Be Worse Than You Think

Can you spell croney capitalism?


http://reason.com/archives/2014/04/04/g ... ndal-worse

"In February 2010, the Obama administration's transportation secretary, Ray LaHood, told America, without a shred of evidence, that Toyota automobiles were dangerous to drive. LaHood offered the remarks in front of the House subcommittee that was investigating reports of unintended-acceleration crashes. "My advice is, if anybody owns one of these vehicles, stop driving it," he said, sending the company's stock into a nose dive.

Even at the time, LaHood's comments were reckless at best. Assailing the competition reeks of political opportunism and cronyism. It also illustrates one of the unavoidable predicaments of the state's owning a corporation in a competitive marketplace. And when we put LaHood's comment into perspective today, it's actually a lot worse. The Obama administration not only had the power and ideological motive to damage the largely nonunionized competition but also was busy propping up a company that was causing preventable deaths.

No one is innocent, of course, but not everyone is bailed out. "...

It will be interesting to see if the Feds come down as hard on GM as they did Toyota.

The OP article was a good read. I always thought Toyota got unfairly slammed by the Feds, and they did not find any mechanical or electrical defects unique to Toyota vs. other designs. A brake over-ride seems like it should be standard on all cars, especially drive-by-wire, but it is relatively new.

I saw a TV interview last night with one GM ignition crash victim's relative and her attorney. The attorney said that after they took legal action against GM, GM actually threatened to sue them, saying they were immune to lawsuits due to their reorganization after the federal bailout.

Here are more details about it...

If you own one of the 1.6 million vehicles General Motors has recalled since February with faulty ignitions and you or a loved one had an accident in the car, there's some more bad news. Your right to collect damages from GM has been signed away. If your accident happened in the years before the old GM's 2009 bankruptcy reorganization, the managers of the auto industry bailout gave immunity to the new GM that emerged.

The GM bailout, which ultimately cost U.S. taxpayers more than $10 billion, is the gift that keeps on giving to the auto giant. Unless courts overturn that immunity, many victims of GM's delayed response in recalling cars with faulty ignition switches will recover few damages.

Owners of the recalled cars, along with the families of two teenagers killed in a 2006 Cobalt crash in Wisconsin, filed a class-action lawsuit last week seeking $6 billion to $10 billion in damages for GM's alleged negligence. But GM enjoys legal immunity from all incidents before its 2009 restructuring.

A liability shield isn't unusual in bankruptcy cases, but what is unusual is that GM and Chrysler, which also filed for bankruptcy protection, weren't required to put money in special trust funds for prospective victims. Instead, the corporate giants can treat injured customers as shabbily as unsecured creditors. What little compensation that is available will come from the sale of closed GM plants being held in a shell corporation.

Competitors harmed

The only way victims can get adequate compensation is by suing the restructured GM, but that would require proving that the company knowingly withheld information to obtain its shield. What is now mostly a legal and regulatory story could explode into politics if it turns out during congressional investigations that GM disclosed the liability issues with the Cobalt and related vehicles to Treasury Department officials negotiating the bailout before they offered to protect the company from liability.

If NHTSA knew about the problems, why didn't Treasury? Car owners aren't the only ones hurt by the bailout deal. GM's competitors are being harmed, too.

For example, notes Center for Automotive Research's Sean McAlinden, the shield gives GM an unfair competitive advantage. The company has avoided millions in annual payments on product-liability claims on top of the lower debt-service costs and special post-bankruptcy tax write-offs that GM received through the bailout.

http://www.usatoday.com/story/opinion/2014/03/20/gm-recall-general-motors-bailout-column/6667449/

Or maybe blown out of any kind of proportion to make it appear worse than it is? For the sake of argument, let's say that 2,000 of the 2.6 million vehicles have had swithces that have failed. That's what, 8/100ths of 1%? 0.08% of the switches installed in 2.6 million vehicles? What is an "acceptable" failure rate, zero? Does the car have to be designed so that the airbags are always armed? I mean, really now, how close to perfect is close enough?

The failure rate of airbags deploying is greater than the failure rate of these switches for crying out loud. Thae failure rate for the aribag to deploy when it should is in the neighborhood of 7%-8%. And we're literally making a federal case out of a faulure rate that is 1/1000th of that figure? Seriously?

There are in the neighborhood of 90 people killed each and every day on the highways and byways in the Union. And we are making 13 deaths in 9 years a national priority? Talk about the tail wagging the dog - just how easy is it for an administration to redirect the attention of the population when they don't like where the spotlight is currently focused?