Lawyer Kenneth Feinberg set to calculates recall-related damages at GM

Article by Andrew Christian, on April 23, 2014

Kenneth Feinberg, a lawyer tapped by General Motors to explore ways to face legal and civil obligations with regards to the current recall crisis, may soon commence calculating the damage done by faulty ignition switches in GM’s cars.

General Motors is asking a bankruptcy judge in New York to confirm its shield from liability lawsuits linked to crashes or defects that took place before its bankruptcy – a move that would render the process of compensating crash victims' families as well as car owners faster, simpler and cheaper.

Feinberg managed the fund for the victims of the September 11, 2001, attacks, and the BP oil spill in the Gulf of Mexico and the Boston Marathon bombing. Feinberg told CNBC in an interview last week that his impression was that GM was asking him to develop a program that might be employed to compensate eligible claimants against the carmaker.

He stated that issues like how much money should be dedicated to the effort and how damages would be calculated remains unknown. Sen. Richard Blumenthal, D-Conn., has urged GM to "do right by these victims” and establish a compensation fund that will “make them whole."

If GM follows the advice, it would be a first for an auto-defect case, remarked Kyle Logue, a professor at the University of Michigan Law School who specializes in tort and insurance law. He said that such move would be good public relations for GM, adding that and it could help the bottom line if it could reduce lawsuits.

Logue noted that unlike lawsuits, compensation fund is certain and is “over relatively quick." GM is expecting to take a $1.3 billion charge on its first-quarter earnings for costs related to the recall.

Brian Johnson, an analyst with Barclays Capital, said in a report in March that GM's recall-related costs could surge to between $2.5 billion and $3.5 billion, including a potential compensation fund. [source: automotive news - sub. required]

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