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Which GM should be liable for accidents due to faulty switches?

There are some 1.6 million General Motors cars on the road that may have faulty ignition switches in them. We're sure some of them must be cruising around San Diego. The company says the faulty switches can suddenly turn the motor of the car off, even as it is underway, creating a hazard. A recall has been announced and fixes are expected to begin starting next month.

What is not clear is how many vehicle accidents may have already resulted because of the defect, but current GM CEO Mary Barra acknowledged this week that it is believed that at least 12 people have died. She says the company is conducting an internal investigation and cooperating with federal authorities in trying to get to the bottom of things.

Chances are you already know a lot of this information. One of the reasons the matter has become a major headline is because GM also acknowledges that problems with the switches were known about as long ago as 2001, though no action was taken until the recall announced last month. And now there are questions about whether Barra's company will or can be held responsible.

The reason there are questions is because of GMs bankruptcy. When it emerged from financial distress back in 2009, a new entity was created, and provisions of the settlement state that the new GM can't be held accountable for the mistakes of the old firm.

A proposed class action lawsuit filed in California yesterday claims that's not right. It says that GM was aware of ignition problems in 2001, kept marketing defective cars until 2007, and that the new GM continued to keep the matter secret until last month.

The suit is one of several that claim the recall has caused the value of owners' vehicles to decline. It is believed to be the first, though, to seek to hold the new GM responsible for old GM's failings.

In addition to those suits, the recall has prompted GM to launch an internal probe of its processes and sparked investigations by federal authorities. Congress also expects to hold hearings to ask why it took GM so long to address the problem.

Source: Reuters, "GM must pay for pre-bankruptcy ignition deception: lawsuit," Jessica Dye, March 19, 2014

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