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Brett Emison
Brett Emison
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Victims Left Out Of GM / Chrysler Recoveries

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As I have written here since September 2009, the GM and Chrysler bailouts unnecessarily penalized auto product defect victims by lumping them in with other unsecured creditors (like pension plans and hedge funds) in the GM and Chrysler bankruptcy reorganization. This means recall and defect victims were left with very little (or even no) recourse against GM and Chrysler, even if they had entered into a settlement with the companies or a jury had awarded a verdict. The lawsuits were eliminated in bankruptcy and the defect victims left to fight for pennies with other unsecured creditors.

Two years later, the Wall Street Journal is taking notice.

Both car companies agreed to pay for recalls, safety defects, and defect injuries and deaths that occurred after the companies exited bankruptcy. In a major victory for consumers, the companies were forced to accept liability for post-bankruptcy industries (even for pre-bankruptcy vehicles). However, those already injured or killed before the companies exited bankruptcy were victimized twice by the bailout deal.

Among the creditors who suffered most, car accident victims represented a distinct mold. Unlike banks and bondholders, this group didn’t choose to extend credit to the auto makers. As consumers, they became creditors only after suffering injuries in vehicles they purchased.

After bankruptcy, GM raised more than $60 billion in the initial public offering of stock in the "new" company. However, many injured victims (and many ordinary investors) were left out.

Will the "new" Chrysler and GM do the right thing and make sure these victims are taken care of? What do you think?

[More on the GM / Chrysler Bankruptcies]

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(c) Copyright 2011 Brett A. Emison