A U.S. senator critical of General Motors’ delayed recall of 2.6 million vehicles for defective ignition switches wants the company to explain its estimate of how much could be paid to victims.
In a letter to GM CEO Mary Barra released Friday, U.S. Sen. Richard Blumenthal, D-Conn., said he is concerned that the company’s estimate that it could pay out $400 million to $600 million in claims payments “undervalues the outstanding claims.”
Blumenthal asked for the company’s rationale in making that estimate, which was part of a quarterly financial report released Thursday. GM has said many times that it is not setting a prearranged cap on a compensation fund for victims or the families of people killed in crashes involving the recalled vehicles believed to be caused by the defect.
GM has linked the defect to 13 deaths and more than 50 crashes, though auto-safety groups and victims’ advocates have suggested it could be higher.
GM has retained compensation expert Ken Feinberg to administer the fund, which will start accepting claims Aug. 1. As part of any settlement agreement, victims or their families will have to agree not to sue GM in court — where the company may enjoy a shield from any claims for incidents prior to its July 2009 bankruptcy reorganization.
Chief Financial Officer Chuck Stevens said Thursday that the estimate of the Feinberg fund’s cost was the company’s “best assessment based on the data that is available to us.”
Blumenthal said that because the compensation protocol allows for up to $1 million in non-economic damages for any person killed and “potentially much more in economic damages for those killed or injured,” he is concerned that GM is underestimating its exposure to investors.
“If this estimated total represents any intent by GM to seek to impose inflexible burdens of proof, utilize the bankruptcy shield from liability … or otherwise seek to avoid making good on its moral obligation, then the compensation fund will unfortunately only be a continuation of the same type of avoidance of responsibility that brought about this problem in the first place,” the Connecticut senator wrote.