Disclosure: I'm proud to be working with the The Ad Hoc Committee of Consumer Victims of GM & Chrysler.

I've been covering the rulings in the GM bankruptcy that set the "new GM" free from any liability for harm already caused to consumers by defective GM cars. Chrysler got an even more awful deal that lets them avoid any responsibility caused by defective old Chryslers, even harm that is yet to be caused.

Now consumer groups are fighting back:

A group of five consumer groups is calling for window stickers warning potential buyers of Chrysler vehicles built before the carmaker's May 30th bankruptcy. The sticker would point out that the company will not be liable if passengers are injured or killed in an accident caused by safety or manufacturing defects. Consumer Action, Center for Auto Safety, Center for Justice and Democracy, Consumers for Auto Reliability and Safety, and National Consumers League sent a letter to the Federal Trade Commission petitioning for this disclosure.

Under the bankruptcy agreement, the new Chrysler was absolved of any responsibility for vehicles built before the government-aided restructuring. An estimated 30 million such vehicles are still on the road. The consumer groups claim thousands of injuries will likely be caused by defective models. Chrysler opposes the stickers.

Also see this petition that the cleverly named CARS (Consumers for Auto Reliability and Safety) is sending to the FTC.

This story from today's LA Times hints at the human carnage caused by defective cars and what it means for the automakers to walk away from the consequences of their actions:

Kimberly Young has recurring nightmares. She is rolling over and over and over, helpless, pinned inside a car.

Outside Manteca, Calif., last August, the 43-year-old accountant was driving to dinner with her daughter to celebrate a promotion. Her memory of the accident is fuzzy, but she believes she swerved to avoid something, then tried to correct. She remembers hearing a horn.

Her 2004 Jeep Grand Cherokee rolled over three times. The roof caved in, and her neck snapped. The accident left Young a quadriplegic. By the time she got out of the hospital, the home she had owned for 11 years was in foreclosure, and she needed round-the-clock care.

And let's not pretend like the defects were unavoidable accidents that the car companies did everything in their power to prevent. This quote from the movie Fight Club by way of Car Gurus is the best summary of the calculus involved in auto quality control:

A new car built by my company leaves somewhere traveling at 60 mph. The rear differential locks up. The car crashes and burns with everyone trapped inside. Now, should we initiate a recall? Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one.

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Disclosure: I'm proud to be working with the The Ad Hoc Committee of Consumer Victims of GM & Chrysler.

This ABC News story does a good job of showing the human side of the carnage caused by GM and Chrysler's defective cars:

A third-degree burn is devastating to anyone, but for Terry Cole, it meant the end of a dream: walking again. GM bankruptcy could end crash/auto defect victims' compensation Terry Cole, in wheelchair, looks at a line of reporters and legal counsel in front of bankruptcy... Expand Terry Cole, in wheelchair, looks at a line of reporters and legal counsel in front of bankruptcy court in New York, June 30, 2009. Cole, who has a claim against General Motors for an injury he suffered, was there to draw attention to the fact that GM may be able to unburden itself of all pending claims as part of the bankruptcy proceedings.

Cole, who has been confined to a wheelchair for more than 30 years, in November 2007 suffered severe burns that he says were caused by a defect in the seat of his General Motors car, a Cadillac Escalade.

Cole was told the skin damage he suffered would make it impossible for him to resume the rigorous physical therapy that had given him hope of getting back on his feet.

The 53-year-old Missouri man is one of at least 400 people suing for damages after being hurt or having family members killed in a General Motors or Chrysler vehicle. He is also one of hundreds who, thanks to the government-backed bankruptcy restructuring of GM and Chrysler, don't know if they'll ever get their day in court.

Here's Joanne Doroshow of the Center for Justice and Democracy discussing the ruling on Fox Business News:

Disclosure: I'm proud to be working with the The Ad Hoc Committee of Consumer Victims of GM & Chrysler.

From the Center for Justice & Democracy's PopTort blog:

Late last night, US Bankruptcy Judge Robert Gerber issued his ruling allowing for the sale of General Motors to move forward - but left the current victims of defective GM vehicles without any real legal recourse.

"It is morally reprehensible that GM will pay for injuries and deaths that occur after the bankruptcy process, but not for the hundreds of victims who have already been hurt by defective GM cars," said CJ&D Executive Director Joanne Doroshow to the Associated Press.

Unlike Chrysler, GM is accepting future liability claims, but those who have already been injured they are completely out of luck.

After the ruling one of the lawyers representing GM victims said he was prepared to appeal the decision, because in part Judge Gerber admitted that the product-liability issue were the "only truly debatable issues in this case."

The "New GM" should be glad that consumer pressure caused them to agree to accept future liability on old GM cars even if they're leaving current litigants in the lurch. Used Chrysler cars could carry a mark of shame:

Consumer groups petitioned the Federal Trade Commission yesterday to require that Chrysler vehicles display stickers warning prospective buyers of liability risks.

The request comes after Chrysler successfully shed its obligation for past and future product liability claims on vehicles manufactured before May 30, when most of the company's assets were sold to a new company run by Italian automaker Fiat.

...

The groups propose adding a warning that reads: "This vehicle was produced prior to the date when the Chrysler bankruptcy was approved. If you buy this vehicle and are injured or killed, even if your injuries were caused by the manufacturer, you or your survivors will not be able to recover your losses by taking action against the manufacturer. If your passengers are injured or killed, even if their injuries were caused by the manufacturer, they and their survivors will not be able to recover their losses by taking action against the manufacturer."

Seems like a sticker like that would shave a couple grand off the sale price on any Chrysler. And you know it'll do wonders for their brand equity as well.

Good ABC TV spot from Oakland about the fight.

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Disclosure: I'm proud to be working with the The Ad Hoc Committee of Consumer Victims of GM & Chrysler.

The GM bankruptcy hearing is in its second day today. Here's a summary of what we're looking at:

Under the plan, U.S. taxpayers would end up owning 60% of the new GM, with other stakes held by Canadian governments, bondholders and the United Auto Workers union.

Holders of $27 billion in GM bonds would get stock in the reorganized company, as will a union-controlled trust fund that will take stock rather than the $20 billion in cash it had been owed to pay future retiree health care costs. Those 650,000 retirees will have their coverage reduced.

GM plans to close more than a dozen factories, drop U.S. brands and shut down up to 40% of its network of 6,000 dealerships.

As if that sweet 60% ownership stake in GM isn't enough, U.S. taxpayers are about to have to shoulder 100% of the social costs of the liabilities for the lawsuits due to defective GM and Chrysler cars.

GM agreed, under heavy pressure from consumers and state's Attorneys General, to cover liability from new suits due to defects in old cars, but if the accident has already happened, too bad.

The victims will be stuck without recourse and the rest of us will have to bear the social cost of their untreated health problems resulting from accidents in defective cars.

As if the emergency rooms weren't already overcrowded enough.

Rep. Andre Carson is pushing legislation to fix this, and I predict we'll see broad based consumer anger and activism on this issue.

There's a really good CBS News story on this issue too. There's a news conference in San Francisco featuring several victims of GM and Chrysler cars tomorrow. Details in the full entry.

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Disclosure: I'm proud to be working with the The Ad Hoc Committee of Consumer Victims of GM & Chrysler.

Today GM's final bankruptcy hearing will determine whether or not they accept liability for harm caused to consumers by defective GM cars built before the "re-launch of GM".

All indications point to no. In response to pressure from consumers, "New GM" has agreed to cover future liabilities from cars built before the bankruptcy ("Old GM"). But they are still walking away from pending liabilities for accidents that have already happened, leaving thousands of victims without recourse.

From the Car Gurus blog:

As part of GM's bankruptcy filing, it's possible it will no longer be liable for injuries or deaths caused by vehicles built by the "old GM." Our friends at Autoblog reported that GM may be reconsidering, but Chrysler set a precedent earlier this month when they emerged from bankruptcy free from such liabilities.

So if you're driving around in an `06 Cherokee or a `94 Lumina, and it suddenly bursts into flames, the folks at Chrysler can just let out a sigh of relief knowing the third-degree burns their vehicle gave you are not their responsibility. Awesome, huh?

News like this doesn't exactly instill the kind of trust GM and Chrysler so desperately need. Why are we supposed to believe that the "new" GM will be run any differently than the old, considering most of the top execs are still in place? At least Chrysler has the advantage of an all-new CEO and top management team.

Multiple state Attorneys General are opposing these provisions in the GM deal:

Attorneys general from Connecticut, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Dakota and Vermont filed an objection in U.S. Bankruptcy Court in the Southern District of New York Friday.

Rep. Andre Carson is pushing a bill to force GM, Chrysler to cover future and current liability claims:

Four years after a traffic accident nearly killed him, Jeremy Warriner was just days away from his court date. Jeremy was set to argue that a faulty brake fluid container on his 2005 Jeep Wrangler broke and sparked a fire after the vehicle's impact--a fire that left Jeremy with severe burns and forced doctors to amputate both of his legs.

When Chrysler filed bankruptcy in April, Jeremy's mediation date was cancelled and his case has now been grouped with a number of other pending claims--likely never to see any payout due to the agreement struck in the bankruptcy court earlier this month. The court has absolved "New Chrysler," which emerged from bankruptcy, from any liability for future claims related to vehicles made before the creation of the new company.

To help Jeremy and thousands of future crash victims have their day in court, Congressman André Carson has filed the "Jeremy Warriner Consumer Protection Act," a bill that would require the newly-restructured GM and Chrysler to carry liability insurance and force the carmakers to cover claims made against them for any defective products produced by their predecessor company.

Regardless of what happens at the hearing today, the victims and consumer rights advocates won't be going away. There will be rallies this week protesting Chrysler in San Francisco, more on that as I have details.

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