Chrysler, GM Bankruptcies Concluded, Defect Victims Cheated

WASHINGTON, D.C. – The Obama administration’s drive-by bankruptcies have left the victims of defect-related crashes to eat their dust, but consumer advocates are turning to other strategies to force Chrysler and General Motors to do the right thing.

Consumers for Auto Reliability and Safety, along with Consumer Action, Center for Auto Safety, Center for Justice & Democracy, and National Consumers League, have petitioned the Federal Trade Commission to require labels informing buyers of a used Chrysler’s unique liabilities. The label they’ve suggested goes like this:

“WARNING    This vehicle was produced prior to the date when the Chrysler bankruptcy was approved. If you buy this vehicle and are injured or killed, even if your injuries were caused by the manufacturer, you or your survivors will not be able to recover your losses by taking action against the manufacturer. If your passengers are injured or killed, even if their injuries were caused by the manufacturer, they and their survivors will not be able to recover their losses by taking action against the manufacturer.”

The California-based advocacy group CARS is asking for the designation under the FTC’s 1985 Used Car Rule, which was promulgated to prevent used car dealers from misrepresenting or failing to mention to buyers important facts about warranty coverage, via a Buyer’s Guide sticker displayed on the vehicle.

The bankruptcy and sale of the once-innovative American carmaker Chrysler to Fiat SPA concluded on June 10th, with $6.6 billion in federal financing. In just 42 days, the government pushed the major players over the finish line and successfully fended off attempts from investors and victims of Chrysler defects to re-jigger the deal. The owners of the “new” Chrysler are a union retirees’ trust, with 55 percent, Fiat, with a 20-percent share that could grow to 35 percent, and the U.S. and Canadian governments, which hold minority stakes.

In a June 11 New York Times story, an anonymous Treasury official said: “This morning’s closing represents a proud moment in Chrysler’s storied history. The Chrysler-Fiat alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker.”

“If shirking your due care responsibilities to customers who trusted you is a source of pride, then Chrysler’s chest must be puffed out so far that the buttons are popping off its pinstriped jacket. The bankruptcy has wiped away all current, pending and future claims against vehicles manufactured by the ‘old Chrysler,’ said Safety Research & Strategies president Sean Kane.

General Motors, which completed its bankruptcy nearly a month later, had sought the same freedoms from product liability. But the company was taken aback by the highly publicized efforts of consumer advocates and attorneys representing defects victims to retain their rights to seek compensation via the state tort system. There were news reports about the victims GM was leaving behind and television advertisements opposing GM’s move to shed all liability. Twelve state attorneys general from Connecticut, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Dakota, Vermont, Illinois, California, Kansas and Ohio objected to the sales, arguing that the bankruptcy court overstepped its legal authority in granting the elimination of successor liability.

GM and the White House’s Auto Task Force, headed by Steven Ratner, who has since stepped down, came to an eleventh-hour agreement, in which GM agreed to accept liability for any future claims against vehicles built under its old ownership. Current and pending claims, however, have been wiped off the table.

In a mere 40 days, GM emerged from bankruptcy with fewer brands, fewer workers and a whole lot of taxpayer cash – $50 billion. (GM is keeping its Chevrolet, Cadillac, Buick and GMC brands and selling or shuttering Hummer, Saturn, Saab and Pontiac.) As of July 10, the majority owners of General Motors are the taxpayers, with a 61 percent stake; and the United Auto Workers health care trust, which owns 17 percent; the Canadian government, which owns 11.7 percent, with the remainder going to bondholders of the old company.

CEO Fritz Henderson told the Associated Press that the revamped automaker will be “faster and more responsive to customers than the old one.”

“Apparently the new GM is doing that by telling the old customers who have been harmed by a GM defect to drop dead,” said Rosemary Shahan of Consumers for Auto Reliability and Safety.

Best feet forward aside, consumer and auto safety advocates are not done demanding that the new companies do something to compensate victims of defects. Indiana Congressman Andre Carson has filed the Jeremy Warriner Consumer Protection Act after Jeremy Warriner, who lost both legs and suffered severe burns in a vehicle fire he alleges was sparked by a faulty brake fluid container on his 2005 Jeep Wrangler. The bill would require the newly-restructured GM and Chrysler to carry liability insurance and force the carmakers to cover claims made against them for any defective products produced by their predecessor company.

A consortium of victims, their attorneys and consumer groups are working on other avenues of redress.

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