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GM-Chrysler Bankruptcy Will Have Chilling Effect on Product Recalls


The General Motors-Chrysler bankruptcy has caused much anxiety among consumers because it seeks to throw out auto product liability and personal injury lawsuits against them. Now, a new report predicts that a loophole created by the bankruptcies of General Motors and Chrysler will make it possible for the companies to avoid issuing product recalls of defective cars that were manufactured prior to the bankruptcy filings.

According to a news article on Consumer Reports, this new report released by Safety Research and Strategies ( looks into the implications of a provision in the GM and Chrysler bankruptcies that allows the automakers to avoid liability for the vehicles made before the bankruptcy. The report projects that based on information provided by both GM and Chrysler and the National Highway Traffic Safety Administration (NHTSA), more than 3,400 Americans will be injured or killed by a defective Chrysler of GM vehicle during the first year after the bankruptcy.

Both GM and Chrysler sought protection in their bankruptcy proceedings from pending and future liability claims against their auto products manufactured before their Chapter 11 bankruptcy filings. Because of the fact that the NHTSA uses death and injury data to look for auto product defect trends, the absence of such claims might very well decrease or have a curbing effect on the number of product recalls conducted by automakers during the post-bankruptcy era.

I absolutely agree with Sean Kane, the president of Safety Research and Strategies. If these product liability claims are not filed we do lose an important “defect surveillance tool.” That means we give these auto makers a “get out free” card where they don’t have to be held accountable or bear liability for deaths and serious personal injuries caused by their product defects. Basically, there is no incentive for GM or Chrysler to recall their defective vehicles.

A close look at the statistics of death and injury claims fielded by these two large U.S. automakers reveals some shocking details. Between the third quarter of 2003 and the fourth quarter of 2008, Chrysler was looking at 3,497 death and injury claims. GM fielded a whopping 15,284 death and injury claims during that same period. These claims collectively represent an annual average of 636 and 2,779 casualties respectively! GM and Chrysler account for more than 40 million fleet vehicles in the United States and the two companies also accounted for nearly half of all claims filed against auto manufacturers during the above-mentioned time period.

Despite these staggering numbers, GM and Chrysler represent only 38 percent of the market share. Between 2004 and 2008, Chrysler issued 109 product recalls affecting 11.4 million vehicles while GM issued 129 recalls that affected 19 million vehicles. Texas, California, Florida, Ohio and New York lead the nation in a state-by-state breakdown of Chrysler and GM death and injury claims.

There is no question that public safety is at jeopardy here. Based on Chrysler and GM’s history of death and injury data and claims, there is no reason to believe that the vehicles they have produced will be defect free. Deaths and injuries as a result of malfunctioning autos made by these two companies will still continue. What protections and safeguards are in place for consumers? So far, not much and that to me is deeply disturbing.

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