Study Forecasts Deaths, Injuries After GM, Chrysler Bankruptcies

June 26, 2009

More than 3,400 Americans will be injured or killed by a defective Chrysler or General Motors vehicle during the first year of the car makers’ bankruptcies, according to a report by a consumer safety advocacy group.

The report predicts that defective GM and Chrysler vehicles sold before the bankruptcies will continue to cause deaths and injuries long after the companies emerge as new entities.

The report, “Public Safety at Risk: Bankruptcies Leave Legacy of Defects, Injuries and Deaths,” also forecasts fewer recalls for vehicles built by the old companies, a situation that it says will result in decreased public safety.

Rehoboth, Massachusetts-based Safety Research & Strategies said its study is based on data provided by both automakers to the National Highway Traffic Safety Administration (NHTSA).

The group was founded and is headed by Sean Kane, who was instrumental in the the Ford Explorer/Firestone tire recalls in the U.S. in 2000. It has additional staff in Washington, D.C. and Chicago.

The report examines a provision in the GM and Chrysler bankruptcies that allows the automakers to avoid liability for the vehicles built pre-bankruptcy. While both would be responsible for launching recalls and repairing defects in their current fleet, they would not be responsible for injuries and deaths caused by those defects, according to the report.

The report says that between the third quarter of 2003 and the fourth quarter of 2008, Chrysler fielded 3,497 death and injury claims; GM fielded 15,284. These represent an annual average of 636 and 2,779 casualties (individual deaths and injuries) respectively. With more than 40 million vehicles in the U.S. fleet, the two companies accounted for 47 percent of all claims filed against auto manufacturers during that time period, the report says. Yet, according to the group, GM and Chrysler only represent 38 percent of the market share.

“Combined, GM and Chrysler have a disproportionate share of the claims,” said Kane, president and CEO of Safety Research & Strategies, “and there is every reason to conclude that the injury and death rates will continue. But the claims will disappear and that will impact the rate of GM and Chrysler recalls and public safety in the future.”

From 2004 to 2008, Chrysler issued 109 recalls, affecting 11.4 million vehicles; GM launched 129 recalls, affecting 19 million vehicles.

According to Kane, the absence of death and injury claims will likely decrease the number of recalls and remedies GM and Chrysler will conduct after the bankruptcies.

“Automakers and NHTSA use death and injury data to monitor and recall defective vehicles,” Kane said. “If the claims aren’t filed, we lose an important defect surveillance tool. And if the companies bear no liability for deaths and injuries caused by the uncorrected defects, what incentive do they have to recall?”

The Safety Research & Strategies report, which includes a full state-by-state breakdown of claims, finds that Texas, California, Florida, Ohio and New York lead the nation in Chrysler and GM death and injury claims. The states with the least number of claims are Washington, D.C., North Dakota, Vermont, Wyoming and South Dakota.

Five consumer groups have gone to court to challenge the Chrysler bankruptcy settlement over the product liability issue.

A number of states have also challenegd the GM bankruptcy over product liability issues.

Cash for Insurance

Meanwhile, a California-based consumer group has also criticized how the bankruptcies treat defective product claims by suggesting that the money from a new “cash for clunkers” program just approved by Congress be used to provide insurance for owners of GM cars.

“The same $1 billion allocated for clunkers could purchase an insurance policy in the GM bankruptcy proceeding to provide for Americans who are injured or maimed, and the families of those killed by unsafe GM cars and trucks,” Consumer Watchdog President Jamie Court wrote in a letter to President Barack Obama.

Court said that the government should make compensation for GM victims a priority before paying cash for turning in old cars.

“While a typical bankruptcy would include successor liability — the new company would be responsible for the defects of the old company — this special process for GM provides no such protection for its victims. The new GM should be required to buy an insurance policy to adequately and fully pay the claims of consumers injured in the past and the future by GM’s defective cars and trucks,” Court wrote.

According to Consumer Watchdog, the success of cash-for-clunkers could very well depend upon the purchase of insurance to cover GM safety claims.

“If you want Americans to use their clunker vouchers for a 2009 GM car in the short term, Americans will have to know that if their gas tanks explode or brakes fail they won’t be able to hold GM accountable for their injuries. That’s certainly not going to help GM dealers move their inventory. Cash-for-clunkers will be far less effective in stimulating the economy if the government vouchers purchase foreign-made cars,” the letter stated.

Consumer Watchdog also pointed out what is said are “inappropriate priorities” in the GM bankruptcy: $100 million for an insurance policy to protect its officers and directors, a policy without a deductible for the executives; $2 billion per year for GM advertising; and hundreds of millions for Wall Street advisors.

“Americans have already sunk $50 billion in GM, and analysts expect that money will never be returned,” wrote Court. “How much is there to provide for those burned or killed by an exploding GM gas tank? Not a dime.”

Source: Safety Research & Strategies
Source: Consumer Watchdog

Topics Claims Trends

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