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

Lamborghini had been expected to refresh its entry-level model – the Lamborghini Huracan – in late 2018 or early 2019. But here is some good news for fans of the...
by - November 20, 2017
The Chevrolet Corvette will be turning 65 years old in 2018, and as part of the celebrations, the brand is introducing a special edition C7 – the Chevrolet Corvette Carbon...
by - November 19, 2017
Tesla revealed that with its new Semi, truck drivers can expect better experience especially with heightened safety and the lower cost of transporting cargo. Indeed, the cabin of the new...
by - November 19, 2017
November 17 is considered a very special day for Tesla, as this is the day that they revealed the highly anticipated Tesla Semi. But Elon Musk did not think the...
by - November 17, 2017
More details have emerged about the new sixth generation of the BMW M3 just as the German premium practically announced the end of the current-gen 3 Series with the unveiling...
by - November 17, 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