In an effort to head off consumer objections to its bankruptcy reorganization, General Motors has promised to honor lemon law claims on future vehicle defects.
The move answers a challenge filed by nine state attorneys general and consumer groups who filed objections with the bankruptcy court, claiming the bankruptcy would deprive consumers of protections they now enjoy.
The Center for Auto Safety, Consumer Action, Consumers for Auto Reliability and Safety, National Association of Consumer Advocates and Public Citizen filed objections to the GM bankruptcy sale because it attempted to immunize the new GM from claims of people who have been or will be victimized by defective GM vehicles.
"We are gratified the General Motors bankruptcy sale documents have been amended to state that the 'new GM' will assume liability for future product liability claims -- that is the claims of people who have not yet been, but who will in the future be, injured or killed in accidents caused by defects in GM vehicles," said Adina Rosenbaum, an attorney with Public Citizen.
"We argued that allowing the sale to go through 'free and clear' of current and future claims would violate the Bankruptcy Code and that it would violate due process to take away the rights of people who will be injured in the future and do not yet even know that they will one day have claims," Rosenbaum said.
GM is apparently hoping to pre-empt challenges that were raised in the Chrysler bankruptcy earlier this month. Chrysler eventually said it would abide by its previous lemon law commitment.
The promise was contained in a document filed with the court. The document assures Treasury Department officials that the new GM would assume liability for future product defect claims. The assurance was requested by Treasury officials.
"The purchaser will expressly assume all product liability claims arising from accidents or other incidents arising from the operation of GM vehicles subject to the closing," the document said.
The reorganization is also being challenged by a group representing about 300 consumers with pending lawsuits against GM for alleged vehicle defects.
Most state lemon laws specify that a manufacturer must provide a refund or replacement for a defective new vehicle when a substantial defect cannot be fixed in four attempts, a safety defect within two attempts or if the vehicle is out of service for 30 days within the first 12,000 to 18,000 miles or 12 to 24 months.
Success in using state lemon laws depends upon three things: keeping good records, providing the right notice, and using arbitration programs where required. As with all cases involving two or more parties, it is important to document the transaction. When it comes to dealing with auto manufacturers and dealers, it's even more important.