In 2014, General Motors Company recalled nearly 29 million cars worldwide due to faulty ignition switches, which

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In 2014, General Motors Company recalled nearly 29 million cars worldwide due to faulty ignition switches, which could shut off the engine during driving and thereby prevent the airbags from inflating. GM has linked 13 deaths and 31 crashes to the defective ignition switches. It counts only incidents that resulted in head-on collisions in which the airbags did not deploy. It does not include, for example, an incident where after a car’s ignition switch failed, the car spun out, hydroplaned, hit an oncoming vehicle, and rolled off the road, dropping 15 feet into a creek. Also, in a collision in which two young women in a Chevrolet Cobalt were killed when the ignition switch shut off the engine, GM counts the death of only the woman in the front seat because the death of the woman in the back seat was not caused by the failure of the airbag to deploy. By contrast, Reuters published an analysis concluding that the faulty switches were responsible for 153 deaths. 

GM was expected to charge $1.2 billion against its second quarter 2014 earnings as a result of its recalls, a charge that could be increased as investigations continued. The fault had been known to GM for at least a decade prior to the recall. GM shareholders who bought GM shares before the ignition switch problem was disclosed have claimed that they were deceived by GM and its management when they purchased their GM shares. They allege that they would not have bought their shares or would have paid less for the shares had the switch problem been disclosed. What type of legal action have the shareholders brought against GM and its management? 

Other long-time shareholders of GM, who have been shareholders before and during the recalls, claim that GM suffered significant damages, including the $1.2 billion charge against earnings, because GM’s management and employees hid the ignition switch problem, resulting in GM’s liability for recalls, as well as legal responsibility for the deaths and injuries to drivers and passengers. What type of legal action have the long-time shareholders brought against GM’s management? With what processes must the shareholders comply to ensure that the lawsuit may continue? 


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Business Law The Ethical Global and E-Commerce Environment

ISBN: 978-1259917110

17th edition

Authors: Arlen Langvardt, A. James Barnes, Jamie Darin Prenkert, Martin A. McCrory

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