GM to use cash on hand instead of insurance to compensate ignition crash victims

Article by Christian A., on July 11, 2014

General Motors will use its cash on hand instead of insurance when it pays for claims stemming from its faulty ignition switch recall crisis, David Roman, GM's director of financial communications, told Business Insurance. GM's open-ended compensation fund -- GM Ignition Compensation Claims Resolution Facility -- was established as claims-paying vehicle for those killed or injured in accidents caused by faulty ignition switches.

The depth of the compensation fund will be solely determined by attorney Kenneth Feinberg, who unveiled it on June 30. Roman says the fund has no cap, adding that Feinberg will have the “final determination on numbers.”

Under the fund, family members of individuals killed in accidents caused by faulty switches are eligible for at least $1 million, with other factors helping increase the amount. Individuals injured in accidents caused by the switches are likewise eligible for compensation.

So far, at least 13 deaths have been linked to the faulty ignition switch, with GM calling back 2.6 million older-model cars to address the issue. Nir Kossovsky, chief executive of broker and adviser Steel City Re, quipped that GM’s reputation at this point is at risk, noting the carmaker made one of the best strategic moves for reputation restoration.

He remarked that while the move will be expensive, “it beats the alternative.” While the GM Ignition Compensation Claims Resolution Facility could be very expensive for the carmaker, other crisis management experts agree that the company has taken the right direction to address the crisis.

Larry Walsh, vice chairman of Hawthorn Group LC, remarked that GM’s move is the right thing to do even from “a cost/benefit standpoint.” He noted that years of litigation could be more harmful to GM and could be costlier. [source: automotive news - sub. required]

If you liked the article, share on:

Comments

Recommended

When Chevrolet came out with the 2018 Equinox last September, the facelifted model was offered in a diesel option for the first time, plus it weighed much less at 400...
by - July 23, 2017
If you are a huge fan of the hardcore GTS version, you probably know that the closest you could get to that model is the upgraded model of the M4...
by - July 23, 2017
Audi’s intention to bring out the Renn Sport Racing version of the Q5 was made clear when it unveiled the Audi SQ5 at the 2017 Detroit Motor Show early this...
by - July 22, 2017
Kia’s Sorento midsize sports utility vehicle is reaching its mid-cycle for the 2018 model year. Thus, its fans, enthusiasts and satisfied customers are expecting the Sorento to receive an update...
by - July 22, 2017
The Lotus Evora Sport 410 astonished the world after arriving as the more powerful and lighter edition of the already impressive Evora 400. Now, Lotus Cars is throwing in another...
by - July 22, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries