GM Directors Off the Hook; Court Nixes Investors’ Lawsuit Over Ignition Switch

By | June 30, 2015

General Motors Co. directors don’t have to face investors’ allegations that lax supervision allowed the company to make cars with faulty ignition systems blamed for more than 100 people their lives.

GM’s board had adequate risk-assessment systems in place even though the carmaker produced Chevrolet Cobalts and Saturn Ions with defective ignition switches, Delaware Chancery Court Judge Sam Glasscock said Monday in throwing out a lawsuit filed by pension funds.

The funds weren’t able to show the “existence of red flags that the board consciously ignored,” Glasscock ruled. Disgruntled shareholders also couldn’t produce evidence of bad faith on the part of the board, he said.

The decision removes another potential headache for GM tied to last year’s recall of more than 2.5 million small cars with ignition flaws.

Deaths officially linked to the switches stand at 104, according to Kenneth Feinberg, a lawyer hired by the carmaker to oversee an out-of-court compensation fund for recall victims. That’s eight times more than the company’s original estimate of 13 fatal crashes tied to the defect.

“The court made the right decision and we’re hopeful all similar suits against directors that focused on the same allegations will eventually be dismissed,” Jim Cain, a GM spokesman, said in a phone interview Monday.

Consumer Suits

The carmaker is facing more than 100 consumer lawsuits over the ignition flaw, which allowed the system to be jarred into the “accessory” position, disabling power steering and preventing air bags from deploying.

The National Highway Traffic Safety Administration fined GM $35 million, the maximum allowed, after finding systemic problems throughout the organization dealing with the ignition recall. GM has agreed with NHTSA to wide-ranging changes to how it reviews safety issues and makes decisions about recalls.

An internal investigation into why it took GM more than a decade to identify problems with a defective ignition switch, led by lawyer Anton Valukas, blamed a lack of urgency in the engineering and legal departments but didn’t reveal any conspiracy to conceal facts.

The Delaware case is In General Motor Derivative Litigation, CA No 9627, Delaware Chancery Court (Wilmington).

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