GM, Chrysler Bankruptcies Make Targets of Dealers, Suppliers

GM, Chrysler Bankruptcies Make Targets of Dealers, Suppliers 601087&sid=ailSVFJYP9n4
July 11 (Bloomberg) -- General Motors Corp. and Chrysler Group LLC dealers and suppliers, such as TRW Automotive Holdings Corp., are becoming targets of product-liability lawsuits in the wake of the automakers’ bankruptcies.
Accident victims’ lawyers in California, Texas, Ohio, South Carolina, Missouri and Colorado have sued dealers and parts- makers on finding that GM and Chrysler are shielded from litigation by bankruptcy law. Attorneys may have no other way to seek compensation for some clients, lawyer James Lowe said.
“The car companies decided they didn’t want to take responsibility for their own vehicles,” the Cleveland plaintiffs’ attorney said in an interview. “I’m suing component-suppliers and dealers.”
Targeting defendants previously protected by the deep pockets of the automakers, and by law in some states, adds a financial threat to suppliers and dealers facing the worst auto market in 30 years. GM said it had $973 million in potential product liability as of March 31. Chrysler didn’t disclose such information.
In a South Carolina case over an allegedly faulty seat belt, a woman who suffered a spinal injury didn’t sue Chrysler, which built the 1996 Dodge Caravan she was riding in. Instead, the suit was filed against Honeywell International Inc., which previously owned the buckle supplier, and against five dealers that bought and sold the vehicle.
“This case is typical of what is happening or will be happening throughout the country,” said the woman’s lawyer, Kendall Few of Greer, South Carolina. He also added Honeywell to cases that he first filed against only GM and Chrysler.
Insolvent Carmakers
Chrysler formed a new company from the sale of its best assets June 10 with $12 billion in support from the Obama administration, which is trying to restructure the U.S. auto industry to return it to profit. GM, which filed for protection June 1 with $65 billion in U.S. aid, completed its own asset sale yesterday.
Chrysler severed all the reorganized company’s liability for cars built before the bankruptcy filing. GM agreed to accept potential liability for accidents occurring after its asset sale, even if they involve vehicles built before bankruptcy. The Detroit-based company is shedding liabilities for existing accident claims, under a court order being appealed by attorneys for current GM plaintiffs.
“Plaintiffs’ lawyers are very entrepreneurial,” said Steven Hantler, chairman of the business-funded Foundation for Fair Civil Justice in Atlanta. “When one source of potential deep pockets dries up, they will try to find another.”
Suppliers, Dealers
Suppliers who helped develop parts may be more vulnerable to lawsuits than dealers, who can argue they are passive sellers, said Hantler, a former Chrysler in-house lawyer.
“The allegiances change like shifting sand, depending on who is left holding the bag,” he said.
Plaintiffs’ lawyers began retargeting lawsuits even before Chrysler declared its insolvency, Lowe said. In one case, “just before the bankruptcy, we dismissed Chrysler and are proceeding against TRW,” the Cleveland lawyer said. The Livonia, Michigan- based company supplied a faulty steering system, he said in the complaint.
In a case in which a woman says she was injured by an air- bag failure, Lowe sued the seller of the Town & Country vehicle he says was struck head-on by a snowmobile going 40 to 45 miles an hour.
“The air bag literally exploded,” Lowe said. “Shards of steel and bolts came flying out of the air bag. One shard cut through the seat belt and into her. One bolt hit her neck and spine, lodging there.”
‘Defective’ Vehicle Sold
The suit was filed not against Chrysler but against Key Safety Systems, which made part of the air-bag system, and the dealer who sold the vehicle “in defective condition,” according to the complaint.
Five of 25 states he has checked, including Kentucky and Georgia, prohibit suing suppliers or dealers, Lowe said, and Colorado has some limitations. The other 19, including New York, Delaware and Illinois, allow the actions, he said.
Some state laws turned dealers into targets after the bankruptcies, plaintiffs’ lawyer John Gsanger said. In Texas, accident victims normally can’t sue a dealership for a manufacturing flaw, said Gsanger, of Corpus Christi, Texas. That changes if the automaker becomes insolvent, he said.
His firm settled all but four Chrysler cases before the bankruptcy and came close in one. “We had a settlement with Chrysler, but we didn’t get the checks in time,” he said.
Seat-Back Suit
With the suit against Chrysler ended, Gsanger said, he sued the dealer over an alleged seat-back failure in the crash of a 1997 Dodge Dakota pickup.
“As soon as Chrysler found itself bankrupt, we wanted to be the first in line with the dealerships,” he said. Even if these dealerships become insolvent, “there’s insurance there” to pay claims, Gsanger said.
“Strategically we have to go against folks who are in the chain of distribution, and that includes dealers,” said Robert Nelson of the San Francisco plaintiffs’ firm Lieff Cabraser Heimann & Bernstein LLP. The buyer of a new car from a dealer has a contractual relationship with the business, he said.
The dealers most at risk are the estimated 1,350 at GM and 789 at Chrysler that are being cut by the automakers. In most cases, dealers kept by the new GM will be indemnified from product-liability losses by the company, said one person familiar with GM’s franchise agreements. Mike Palese, a Chrysler spokesman, declined to comment. Renee Rashid-Merem, a GM spokeswoman, declined to comment
Hantler, of the Fair Civil Justice group, said dealers “with rare exceptions” should face no liability.
Dealers’ Role
“They are just selling a product,” he said.
Dealers didn’t make the car, didn’t test it and don’t have the technical knowledge to find defects, said Richard Bowman of Bowman and Brooke LLP in Minneapolis.
Bowman, a longtime defense lawyer for auto companies, agreed with Hantler that suppliers may be more vulnerable than dealers.
Suppliers “at least made the part,” he said. “But none of that applies to the dealer, and a jury will know that. Defending a dealer before a jury would be about as much fun as a defense attorney can have with his clothes on.”
In a Colorado case, six riders in a 1997 Dodge Caravan minivan that hit a raised manhole cover are suing suppliers Honeywell, Key Safety Systems and Robert Bosch GmbH and a dealership, alleging an air bag was defective.
In California, a case about to be filed will include a request for damages from a fuel-tank supplier on a Chrysler model instead of the automaker, said Ben Hogan, a Birmingham, Alabama, attorney who litigates across state lines.
Asbestos Parallel
When plaintiffs’ lawyers first started suing companies that sold or used products containing asbestos after the asbestos producers were all bankrupt, no one thought those would succeed, Hantler said. More than 70 companies have been forced into bankruptcy by litigation, including secondary users.
Honeywell, the world’s largest maker of airplane controls, sold its seat-belt business in 1998 and no longer makes the product.
“The current state of the auto industry has no bearing whatsoever on Honeywell’s limited liability for cases involving automobile accidents,” spokesman Rob Ferris said. “These cases are typically fully insured.”
John Wilkerson, a TRW spokesman, and David Stoyka, a Key spokesman, declined to comment. Cheryl Kilborn, a spokeswoman for Bosch, declined to comment on the Colorado case because it is in litigation.
“Like everyone else in the industry, we’re monitoring” a possible rise in cases, Kilborn said. “We feel it’s too early to say that this is a trend.”
Civis Romanus Sum

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If you dance with the devil (buy their products) then you are going to get burned by the devil. GM & Chrysler don't deserve our support as they don't honor their issues. Spare parts for disconinued models will also be an issue in the years to come.
Can't say I feel sorry for new GM & Chrysler owners, this has been coming and announced for a long time.
For reasons we can only guess at, our corrupt representatives are giving GM & Chrysler a free ride on the taxpayers. And they are not accounting for where the $100B in taxpayers cash is really going.
Isn't liberal corruption a grand thing? Produce a defective product and Obama will provide the profit while people get stuck. Now you know why the car was cheap (or should have been).
People should think before they vote next time. Some big changes in DC and Ottawa are really needed.

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