General Motors hit with $10bn lawsuit for car recalls

A new lawsuit wants General Motors Co (GM) to compensate millions of car and truck owners for lost resale value potentially exceeding $10 billion, claiming that a slew of recalls and a deadly delay in recalling cars with defective ignition switches have damaged its brand.

According to the complaint filed on Wednesday with the federal court in Riverside, California, USA, GM hurt customers by concealing known defects and valuing cost-cutting over safety, with 13 deaths being linked to those vehicles.

It said this has caused a variety of late-model vehicles to lose roughly $500 to $2,600 in resale value, leading to roughly 40 recalls covering more than 20 million vehicles in 2014.

Hagens Berman Sobol Shapiro, which filed the lawsuit, said the case could be worth more than $10 billion. But first, it is seeking to force GM to pay a potential 15 million to car and truck owners — not just those whose vehicles were recalled for damage to its brand and reputation.

The lawsuit seeks class-action status for people who owned or leased GM vehicles sold between July 10, 2009, and April 1, 2014, or who later sold such vehicles at cut-rate prices. However, vehicles affected by the earlier ignition-switch recalls are not included in the lawsuit.

A GM spokesman, Greg Martin, declined to comment on the lawsuit.

“Many customers and analysts recognise the strength of the GM brand and this market recognition has resulted in increased sales, transaction prices and residual values,” he argued.

The plaintiff, Anna Andrews, a resident of La Quinta, California, USA, said she would not have bought her used 2010 Buick LaCrosse, or would have paid less for it, had GM done a better job of disclosing vehicle defects.

She painted a disturbing picture of GM’s approach to safety, including how the US automaker would encourage employees to avoid words such as “bad” and “failed”, and use euphemisms such as “issue” or “condition” rather than “problem” when discussing defects.

“GM’s egregious and widely publicized conduct and the never-ending and piecemeal nature of GM’s recalls has so tarnished the affected vehicles that no reasonable consumer would have paid the price they did when the GM brand meant safety and success,” the complaint said.

The case is Andrews v. General Motors LLC, U.S. District Court, Central District of California, No. 14-01239.