Lawsuit says GM owners owed around $10 billion in lost value after recalls

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June 18, 2014 - 2:39 pm ET

RIVERSIDE, Calif. (Reuters) -- A new lawsuit says General Motors should compensate millions of car and truck owners for lost resale value, potentially exceeding $10 billion, because a slew of recalls and a deadly delay in recalling cars with defective ignition switches has damaged its brand.

According to a complaint filed today with a federal court in Riverside, Calif., GM hurt customers by concealing known defects and valuing cost-cutting over safety, leading to roughly 40 recalls covering more than 20 million vehicles this year alone.

It said this has caused a variety of late-model vehicles to lose roughly $500 to $2,600 in resale value.

Hagens Berman Sobol Shapiro, which filed the lawsuit, said the case could be worth more than $10 billion, and is the first seeking to force GM to pay a potential 15 million car and truck owners, not just those whose vehicles were recalled, for damage to its brand and reputation.

A GM spokesman, Greg Martin, declined to comment on the lawsuit. He said that many customers and analysts recognized the strength of the GM brand and that the market recognition has resulted in increased sales, transaction prices and residual values.

The lawsuit painted a "disturbing picture" of GM's approach to safety, including how "in truly Orwellian fashion" the largest U.S. automaker would encourage employees to avoid words such as "bad" and "failed," and use euphemisms such as "issue" or "condition" rather than "problem" when discussing defects.

"GM's egregious and widely publicized conduct and the never-ending and piecemeal nature of GM's recalls has so tarnished the affected vehicles that no reasonable consumer would have paid the price they did when the GM brand meant safety and success," the complaint said.

The plaintiff is Anna Andrews, a resident of La Quinta, Calif. She said she would not have bought her used 2010 Buick LaCrosse, or would have paid less for it, had GM done a better job of disclosing vehicle defects.

Her lawsuit seeks class-action status for people who owned or leased GM vehicles sold between July 10, 2009, and April 1, 2014, or who later sold such vehicles at cut-rate prices.

Vehicles affected by the earlier ignition-switch recalls are not included in the lawsuit. Thirteen deaths have been linked to those vehicles.

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http://www.autonews.com/article/20140618/OEM11/140619854/lawsuit-says-gm-owners-owed-around-10-billion-in-lost-value-after