GM Won't Use Insurance Funds for Ignition Switch Compensation

By | July 09, 2014
Last week, General Motors announced its compensation plan to help out the victims and families of the ignition switch recalls. However, the automaker will not be looking to insurance funds to pay the open-ended compensation, and will instead rely only on the cash the company has available. While GM is taking steps in the right direction to better its reputation, the compensation fund is expected to cost the company billions. David Roman, GM's director of financial communications, told an affiliate of Automotive News, Business Insurance, that "There's no cap on it. Mr. Feinberg will have the final determination on the numbers." Right now, the family members of those that died as a result of the defective ignition switches are eligible for upwards of $1 million, however, certain factors may increase that number. But General Motors is trusting in Feinberg and his expertise. As the man who led the September 11 Victim Compensation Fund, BP Deepwater Horizon Disaster Victim Compensation Fund, and the fund set up for the 2013 Boston Marathon victims, Feinberg has the tools to see this through.
But there is one concern that still threatens GM's rising reputation. Going above and beyond in its compensation plan may be beneficial, but now the company is considering claims that had settled before the 2009 bankruptcy reorganization. Doing so could "undermine the ability of General Motors down the line to try to enforce the finality of the agreements," commented Royal F. Oakes, partner at Barger & Wolen L.L.P. in Los Angeles. Source: Business Insurance, Automotive News (Subscription Required)