This file photo, shows a key in the ignition switch of a 2005 Chevrolet Cobalt in Alexandria, Va. General Motors has paid about $2.5 billion to settle claims tied to the defective ignition switches in about 2.5 million vehicles.
(Photo: Molly Riley, Molly Riley, AP)
Judge Martin Glenn of U.S. Bankruptcy Court in New York has thrown out a settlement agreement that could have triggered a payment of $1 billion of General Motors stock to owners of cars with defective ignition switches.
The case is tied to GM’s 2014 recall of 2.6 million vehicles with defective ignition switches, including one linked to 124 deaths.
A GM spokesman declined to comment on the ruling.
Most of the cars were produced before the automaker’s 2009 bankruptcy restructuring. When GM emerged from bankruptcy, a new corporation, General Motors Co., was created with the company’s good assets. The remaining “bad” assets, mainly shuttered plants and legal claims tied to vehicles made before the bankruptcy, were placed into an entity call Motors Liquidation, or “old GM.”
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General Motors will pay $120 million to settle claims from dozens of states in its massive ignition switch defect scandal. The settlement announced Thursday resolves one piece in the legal battles involving a case that left at least 124 people dead and 275 injured in small cars such as the Chevrolet Cobalt and Saturn Ion that were made by the old GM. The news release noted that “certain employees of GM and General Motors Corporation knew as early as 2004 that the ignition switch posed a safety defect because it could cause airbag non-deployment. Brian McNamara, Detroit Free Press
Those assets have been managed by a trust.
Lawyers for the car owners and the trust had agreed to a deal in August calling for the trust to pay $1 billion in shares of new GM, but they never signed the agreement. The trust walked away several days later, instead accepting GM’s offer to help pay for the trust’s defense against the car owners’ claims.
The owners’ claims included between 400 and 500 personal injury and wrongful death claims.
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GM has paid about $2.5 billion to settle other claims linked to the defective ignition switches, including a $900 million payment to settle a criminal investigation by the U.S. Department of Justice.
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