GM will allow consumers refund and replace defective vehicles

General Motors Corp. stated in its court filing that it would assume liability for future product defects as one of several concessions offered in a bid to win court approval for a quick sale from bankruptcy. Besides, it will change the terms of its proposed asset sale to address objections raised by over 20 suppliers and is working out a consensual agreement with Toyota Motor Corp. to address a joint-venture factory it operates with Toyota in Fremont, California.

It is known that a group of nine state attorneys general, including Ohio and Connecticut, had objected to the GM reorganization brokered by the Obama administration because it would have robbed consumers of protections against product defects under state laws. In response, GM said it would continue to pay "lemon law" claims so that consumers would be entitled to a refund or replacement for defective vehicles.

According to the GM reorganization plan, a new company would be created to buy the automaker's best assets out of bankruptcy in a deal scheduled to close by August. The new GM would be 60-percent owned by the U.S. government, 17.5 percent by the United Auto Workers union and 11.7 percent by the governments of Canada and the province of Ontario.

The Ad Hoc Committee of Consumer Victims of General Motors, a group representing about 300 Americans with lawsuits against GM for alleged product defects, has objected to the reorganization since those injury and wrongful-death claims would have to be paid out from the sale of GM's mostly worthless assets. The group said in a bankruptcy court filing earlier this month the automaker's insurance would only cover product liability claims of up to $35 million per claim.

Last week, a senior executive said that GM is scrapping the Pontiac Vibe it builds there and has not been able to find a new vehicle to produce jointly with Toyota.

In addition, Toyota objected to GM's reorganization plan and asked the bankruptcy court to prevent the company from transferring its 50-percent ownership in the New United Motor Manufacturing Inc joint venture to the newly nationalized automaker, so far as GM had not provided any "assurance" about its plans for the joint-venture since filing for bankruptcy.