Critics of GM Bailout Wonder Whether Government Ownership Hindered Response

Posted March 24, 2014 at 5:46pm

Critics of the Obama administration’s bailout of the domestic auto industry are questioning whether regulators may have ignored safety defects in General Motors Co. vehicles while the carmaker was under taxpayer ownership.

Peter Flaherty, president of the National Legal and Policy Center, wrote House Energy and Commerce Chairman Fred Upton, R-Mich., last week urging him “to use every opportunity to examine what, if any influence the U.S. government’s ownership of GM has had on this troubling failure to address the dangerously flawed vehicles.”

GM has recalled about 1.7 million vehicles because of defective ignition switches, though all the vehicles in question were built before GM’s reorganization in 2009 under a structured bankruptcy — and long before the company’s current top managers were in place.

But the bankruptcy raises issues about responsibility.

Under the court-approved reorganization, defect complaints and lawsuits brought before the bailout are the responsibility of the “old GM,” which is now made up of the remaining “bad assets” that the company shed. These are now managed by a committee of secured creditors who lost billions of dollars in GM’s fall.

The “new GM” is liable for complaints brought since the company restructured in 2009.

GM Chief Executive Mary T. Barra told USA Today last week that the company had been too slow to respond to the reports of defects, but she declined to promise that the automaker would accept liability for deaths and injuries that occurred before the bailout.

When questioned last week at a news conference whether government ownership had any impact on the regulatory response to the ignition switch problems, Attorney General Eric H. Holder Jr. responded: “I’m not sure that is necessarily true.”

But Holder said he could not comment further because he had not “confirmed nor denied that an investigation is under way.”

“Maybe that’s a question for later on,” he said.