President Obama traveled to Michigan this week to declare the auto bailout a success. Interestingly, he toured a Ford plant. The company did not participate in the bailout.
GM is still trying to shake the Government Motors moniker, and that was certainly the reason for Obama’s nonvisit.
Earlier this week, General Motors Company boasted that sales for December were the strongest in seven years. A review of the facts shows that this is not exactly true. You see, GM Co. has not been in existence for seven years. While GM points to this technicality when trying to weasel out of liability claims from the past, it continues to act as if the company is a stalwart 100 year-old American institution.
GM described December’s sales as follows in its press release, “General Motors Co. (NYSE: GM) dealers in the United States delivered 274,483 vehicles last month for the company’s best December sales in seven years.” That statement is somewhat in conflict with GM’s stance that the company was formed in July of 2009. In fact, on July 7th of 2009 GM trumpeted that fact with a release titled, “The New General Motors Company Launches Today” which clearly stated that, “The new General Motors Company began operations today…”
I will not rehash the GM bankruptcy debate which questioned whether or not a GM “sale” to the US government was a legitimate means to eliminate claims of creditors along with other liabilities prior to July of 2009. Suffice it to say, the unique bankruptcy processes of both GM and Chrysler were suspect. It is now no small matter to consider whether or not GM is, or is not, the same company that it was prior to the bankruptcy process. GM’s defense for ongoing liability lawsuits against them is that they are a different company. Why are they acting as if they are the same company as they were seven years ago when it comes to making sales comparisons?
The company that is now known as General Motors Company was previously known as General Motors Corporation which, supposedly, was an entirely different company. A recent article by Consumerist points to how GM uses that as a defense against liability claims stating the following:
General Motors made it clear several months ago that it would use its 2009 bankruptcy to shield itself from liability in lawsuits regarding the now massive ignition switch defect recall. Yesterday the carmaker reiterated its stance that it can’t be held responsible for the bad behavior of the “Old GM.”
Reuters reports the company, which faces 130 lawsuits over accidents and lost vehicle value related to the recall, filed a brief saying that plaintiffs in the cases were trying to re-litigate issues that had been aired and resolved five years ago during the company’s bankruptcy hearing.
“Plaintiffs resurrect the same failed arguments as the creditors before them made in seeking payments from New GM for Old GM’s liabilities,” the brief said.
GM’s argument hinges on its belief that when it filed for bankruptcy during the recession its restructuring plan – which included selling its assets, brands, logos, and trademarks to a new corporate entity called NGMCO Inc. (now known as “General Motors”) – absolved it from many of the liabilities of the “old” GM.
Lawyers for plaintiffs may want to point to GM’s constant references to the company’s existence prior to 2009 as an admission that GM is not truly a “new” company, and as such should be responsible for liabilities arising from events which occurred before the 2009 sale. Does anyone really believe that the trust for “Old” GM creditors, and not the current company known as GM, was responsible for the deaths of accident victims that were caused by GM’s ignition switch recall delay?
The other legal tactic of litigants is to claim that GM’s bankruptcy proceeding was flawed because the material facts of ongoing defective vehicle lawsuits were hidden from the bankruptcy court. While this seems to have been obvious, the politically-powerful GM has friends in high places and it is unlikely that the bankruptcy court will rule against them.
Whatever the outcome of GM’s liability issues, the company should stop being deceptive when making comparisons to past performance. Is the company a 100 year old company or a five year old company? While many may think it is a minor technicality, there are some victims of GM who feel it is the same GM that existed before 2009. As such, GM should be held accountable for events which occurred before the debatable proclamation that this is a brand new company.
Mark Modica is an NLPC Associate Fellow