US-based struggling car manufacturer General Motors Corp. (GM) has agreed to accept liability for future product claims, paving the way for the firm's emergence from Chapter 11 bankruptcy.
According to documents filed on June 26 to a US bankruptcy court, GM said that it would assume all product liability claims regardless of when the product was purchased, after eight state attorneys general and consumer groups opposed part of GM's bankruptcy plan to free it from future liability for vehicle defects.
Under GM's previous plan, "New GM" would not have assumed any liability for future claims related to GM vehicles made before the sale and restructuring of the new company. That meant that consumers who wanted to file a lawsuit related to a defective GM vehicle would have had to seek compensation from "Old GM," a collection of mostly unprofitable assets left over after the sale, where there likely would be nothing left to pay their claims.
On the other hand, GM said it would use an idled midsize car plant in Orion Township, about 40 miles north of Detroit, to assemble small and compact cars. GM said that it expects to start retooling the Orion assembly plant in late 2010, and run two shifts there by 2011, producing 160,000 vehicles annually. The move is expected to save 1,200 jobs.
The company, which filed for bankruptcy on June 1 with $82.3 billion in assets and $172.8 billion in debts, faces a hearing on June 30 over its restructuring plan to sell its assets to a new government-controlled company and emerge from Chapter 11 is scheduled for Tuesday, June 30.
Under the reorganization plan, the federal government, which has committed more than $50 billion to the restructuring, would hold 60.8 percent of the "New GM", with 17.5 percent owned by the United Auto Workers Trust and 11.7 percent owned by the Canadian government.
Consumer groups and attorneys welcomed the amendment but said GM, along with Auburn Hills, Michigan-based Chrysler Group LLC, should do more. After bankruptcy proceedings similar to those being pursued by GM, Chrysler's assets were sold to a new entity led by Italian automaker Fiat Group S.p.A., free of existing and future product liability claims.
Chrysler said that it would end production of the Dodge Ram at its St. Louis North Assembly plant on July 10. St. Louis North is one of the five plants the company said it will close by the end of 2010, as they were considered "bad assets" under Chrysler's bankruptcy protection filing. Chrysler assets not sold to Fiat, including eight plants, remain under Chapter 11 protection. Hearings to decide what to do with these so-called bad assets and to settle claims by the company's creditors will continue. The next hearing is scheduled for Tuesday, June 30.