GM Hopes to Turn the Key on Recall Crisis with Limitless Victim Fund

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The GM safety recalls have officially reached nauseating levels. On Monday, soon after Kenneth Feinberg, the GM-appointed attorney who will run the brand’s compensation fund, announced details of the filing and payment process, GM announced that an additional 8.4 million vehicles would be recalled, most for the same ignition switch issue at the center of the brand’s ongoing crisis

Globally, GM has now recalled over 29 million vehicles in the first six months of this year, and while CEO Mary Barra’s newfound diligence may help curb further accidents and injuries, the ever-expanding roll call of recalled vehicles, now dating back to 1997, is painting a much more grim picture of GM’s future as a trustworthy automotive brand. 

Even still, GM has recorded its best June since the recession. But how long will consumers continue to be enamored with a brand that can’t keep its vehicles on the road?[more]

At a press conference on Monday, Feinberg, who orchestrated other major compensation programs including funds for victims of the September 11 attacks and the Boston Marathon bombings, shared details of GM’s plan to compensate victims of crashes related to the ignition switch issue. The fund, which will have no cap, will pay out settlements of as little as $20,000 to over $4 million based on the individual circumstances of accidents, victims, and their families. 

The fund will be open to claims from Aug. 1 through Dec. 31, with payouts—which will be determined using a modified version of the US Bureau of Labor Statistics calculations of the economic loss in human tragedy—paid within 90 days in most cases. 

“GM delegated to me full and sole discretion to decide which claims are eligible, and how much money they should get,” he said, according to USA Today. “There are no appeals (by GM or victims).”

Feinberg’s plan goes against the previous parameters set by GM in evaluating victims of crashes related to the initial 2.6 million vehicles recalled in February. Of those, GM only accounted for 13 deaths, a number that will likely increase exponentially under Feinberg’s fund, which will not discriminate against front and backseat passengers, as well as drivers and passengers in vehicles involved in crashes with the recalled cars, and pedestrians who were killed or injured as a result of a crash. Feinberg also said that negligence, such as alcohol, drugs or cell-phone use in relation to a crash will not be considered when determining settlements. 

Feinberg’s plan is estimated to cost GM billions, but that sum will likely be less than what GM could have paid out had more victims chose to settle in court. 90 percent of cases are expected to be settled through the fund, with GM planning to take an additional $500 million charge against earnings to pay for new recalls on top of the $1.2 billion it already expects to spend on recall repairs. 

“We’re hitting unprecedented numbers and it’s reasonable for people to start asking, ‘When and where will it end?'” said Karl Brauer, an analyst with Kelly Blue Book.

Will Barra and Feinberg’s no-holds-barred approach to righting the ship keep GM’s head above water?

• Connect with Alicia on Twitter: @aliciaciccone

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