Class action demand: $10 billion for lost GM resale value

by Walter Olson on June 19, 2014

“It may sound silly, but lost resale value is what cost Toyota a whopping $1.3 billion in claims when those suits were settled in late 2012.” And if lawyers can extract $1.3 billion in a case where there was nothing wrong with the cars, imagine how much they might extract in a case where there was. [Jalopnik]

{ 8 comments }

1 SPO 06.19.14 at 10:53 pm

Um, wouldn’t the class action device be the perfect vehicle for dealing with this issue? GM cars will have less resale value because of the ignition issues GM hid. Seems to me that recompense is justified.

2 Walter Olson 06.20.14 at 12:22 am

Something to think about: 1) the flimsy ignition switch is extremely cheap to replace with an adequate one; 2) doing so fixes the safety risk of unintended turning from engine power to auxiliary; 3) GM is of course already footing the bill for the recall including the cost of the part.

3 spo 06.20.14 at 3:03 am

I don’t disagree with any of those points—but I don’t see how GM gets credit for footing the bill etc. I buy what I think is a nice new car, and when I go to trade it in, it;s worth less than it should be because they made a car that shuts off when being driven. As between car owners and car manufacturers, who better to bear that loss? I don’t disagree that the trial lawyers would get a windfall, but once again, that’s not really an argument to deny people some recompense here.

Tell you what–let’s say a brand new car is hit, not totalled, by a tortfeasor. Is it really right that, even after repairs, your car is worth less? Maybe that’s what we have to live with in society because litigating that is too costly and drives up insurance for all, but that is an injury, and typically a justice system would allow recompense.

4 Scott 06.20.14 at 7:26 am

Living in the detroit area, used american made cars were already abundant and low cost. Time to pick up a used CTS-V or Corvette!

5 David Schwartz 06.21.14 at 1:11 am

Sure, the car had a defect. But they’re fixing that defect at their expense. The collateral affect of people valuing the car less because of the publicity or fear that there might be other defects is just not fairly attributable to the defect. It’s like suing the guy who robbed your house because you got into a car accident on the way to police station to report the robbery.

6 William Nuesslein 06.21.14 at 9:13 am

Mr. Olson’s comment refers to the Toyota case. I understand that despite the hysteria in Congress and the press, and an averse jury verdict, Toyota sales were great.

There is a terrible asymmetry in regulation and litigation. I saw a picture of a car that was totaled by a brother-in-law. The car was completely destroyed except for the passenger compartment. Excellent engineering permitted my bother-in-law to survive his accident unscathed. Seat belts and engineering have reduced traffic fatalities from 50,000 a year to 30,000 a year. The disparagement of Toyota and GM is horrifically ignorant.

So was the ignition switch problem mishandled? Certainly says all kinds of folks on their hobby horses. But we see the chaos that ensues when the trigger for action is set low. My calculation showed that the risk of death from the trip to and from a Toyota dealer for unintended acceleration roughly equaled the risk of death from doing nothing. Actually the risk was much greater because the cause of the accidents, peddle misapplication, couldn’t be fixed at the dealer.

It also seems to me that the ignition switch problem would be related to wear and that looseness in the switch would have been detectable to drivers.

7 SPO 06.21.14 at 10:39 am

Mr. Schwartz,

When other people’s actions (here, discounting the value of the car) are foreseeable and reasonable, it seems allocating the loss to the person whose conduct led to those actions is certainly fair.

8 David Schwartz 06.22.14 at 4:22 am

SPO: I don’t believe that it’s reasonable to discount the value of a car for a defect that has been fixed. IMO, the unreasonable actions of third parties breaks the causal chain.

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