Why fair compensation for GM ignition defect will be hard

On one hand, the GM compensation fund has a clear culpable party, unlike 9/11 or the Boston bombing. But some of the accidents took place more than a decade ago. Details about the plan were announced Monday.

Manuel Balce Ceneta/AP
Kenneth Feinberg, the independent claims administrator for the General Motors Ignition Compensation Program, announces the details of the program during a news conference at the National Press Club in Washington Monday.

General Motors announced a compensation plan Monday that is considered more expansive than expected, but it will not necessarily shield the company from potential criminal charges.

GM has said it is aware of 54 accidents – and at least 13 deaths – related to a defective ignition switch that disables airbags, power brakes, and power steering. But a 2012 GM document released this month by a congressional committee investigating the situation says the company was aware of more than 800 accidents.

The number of accidents covered by the compensation is likely to increase. GM’s tally includes only front-end crashes in which airbags did not deploy, but Kenneth Feinberg, who the company hired to oversee the claims process, is also including side-impact crashes and others that can be traced to the malfunctioning airbags, he said in a briefing Monday.

GM initially recalled 2.6 million vehicles because of the defect. On Monday, the automaker announced more recalls, bringing the number to 6.8 million vehicles in the US. Worldwide, GM has recalled 25 million vehicles – a record – with the majority tied to the ignition switch.

Mr. Feinberg would not estimate a total cost for claims. “Whatever it costs, all eligible claims will be paid,” Mr. Feinberg said at the Monday press conference in Washington.

Feinberg oversaw the $7 billion fund for the victims of the 9/11 terrorist attacks, as well as for the Gulf of Mexico oil spill, the Boston Marathon bombings, and the 2012 mass shooting at an Aurora, Colo., movie theater.

But the GM fund will be different in that there is a culpable party, which means payments are expected to be higher. GM has said it will not cap the overall amount it will spend on victims. A second difference is the length of time that has lapsed between the February recall and 1997, the earliest model-year of vehicles that affected by the ignition switch recall.

Feinberg says determining a link between the defect and some accidents that took place more than a decade ago will be difficult.

“Unlike 9/11 and unlike BP, the unique challenge here – some of these automobile accidents are very old, the automobile is long gone – trying to build a circumstantial case when you don’t have the automobile is a challenge,” he said.

The fund will require claimants to submit crash scene photographs and other documentation related to the accident, such as police reports, warranty and maintenance reports, and “black box” data that could show the key was in the “off” position at the time of the crash.

GM is allowed to dispute all decisions made by Feinberg’s office, but it does not have the power to appeal, he said.

“On any particular claim, [GM] must honor my decision,” he said.

Claims must be filed between Aug. 1 and Dec. 31 of this year. A website, GMIgnitionCompensation.com, is established to help navigate claimants through the process.

GM remains under a Justice Department probe looking into potential criminal liability. There are also ongoing investigations from the federal Securities and Exchange Commission, a group of state attorneys general, and two congressional committees.

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