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GM Avoids $1 Billion Stock Payment in Ignition Switches Deal
A federal bankruptcy judge has tossed out a deal that would have forced General Motors Co. to give as much as $1 billion in stock to help pay victims of the company’s defective ignition switches.
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A federal bankruptcy judge has tossed out a deal that would have forced General Motors Co. to give as much as $1 billion in stock to help pay victims of the company’s defective ignition switches.
U.S. bankruptcy Judge Martin Glenn agreed with GM that the deal was made in secret and is unenforceable, Bloomberg News reports.
The case involves Wilmington Trust, which managed a fund set up during GM’s bankruptcy restructuring on behalf of “old GM.” The trust was established to resolve hundreds of personal injury cases and loss-of-value claims by owners of affected GM cars. Switches in the vehicles could spontaneously turn off, thereby disabling the engine, power steering, power brakes and airbags.
The agreement was constructed in a way that hiked the total value of owner claims above $35 billion. Surpassing that threshold triggered a provision that would force the $1 billion GM stock contribution to help pay for settlements.
GM argued that the deal, which was never signed, was structured solely to squeeze the company for more concessions. Judge Glenn agreed, calling the case a “very troubling dispute” and blasting the trust’s “dishonesty, or bad faith.”
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