THE BLOG
06/26/2009 02:25 pm ET Updated May 25, 2011

No Cash-For-Clunkers Without Compensation For GM Victims

Detroit's gotten some big handouts lately from the taxpayer and President Obama is about to deliver another $1 billion with his signature on the cash-for-clunker program. The program, if extended, could well cost Americans $4 billion.

Cash-for-clunkers, which allows up to $4,500 in government vouchers for trade-ins of fuel inefficient cars through November, may have merit. It shouldn't be a priority, though, when the government's reorganization of General Motors denies any compensation to motorists injured by, and families of those killed by, defective GM vehicles.

It's time for President Obama to soberly reevaluate how taxpayer money is being spent on
carmakers and change course.

The same $1 billion allocated for clunkers could purchase an insurance policy in the GM
bankruptcy proceeding to provide for Americans who are injured or maimed, and the
families of those killed by unsafe GM cars and trucks. The United States government
should make compensation for GM victims a priority before paying cash for clunkers.
To date the government has chosen not to prioritize compensation for victims.

While a typical bankruptcy would include successor liability - the new company would
be responsible for the defects of the old company - this special process for GM provides
no such protection for its victims. The new GM should be required to buy an insurance
policy to adequately and fully pay the claims of consumers injured in the past and the
future by GM's defective cars and trucks.

In contrast to its inadequate insurance coverage for injured consumers, GM is spending
$100 million in taxpayer money to purchase an insurance policy to protect its officers
and directors, a policy without a deductible for the executives.

Hundreds of millions of dollars have been set aside as well for Wall Street investment
banks to provide financial advisory services to GM.

Taxpayers have also been asked to pay $2 billion per year for GM advertising, which is
greater than Toyota's annual advertising.

Americans have already sunk $50 billion in GM, and analysts expect that money will
never be returned.

How much is there to provide for those burned or killed by an exploding GM gas tank?
Not a dime.

As an attorney, the president should appreciate that many of these GM cases involve evidence
that defective designs were intentionally concealed from the public to save money. For
example, one notorious GM memo shows that GM engineers calculated that
it would be cheaper to pay out lawsuits in hundreds of cases per year by concealing a
defect that led to fuel fed fires rather than recall millions of vehicles. Such cold-hearted
calculations should not prove prophetic.

The president needs to send a signal that those who have suffered from these calculations are worth at least as much as an Oldsmobile Cutlass Supreme. He simply cannot allow this injustice to stand.

Practically, the success of cash-for-clunkers could depend upon the purchase of
insurance to cover GM safety claims. Under the current bankruptcy filing, New GM
would not be accountable for injuries and deaths from safety defects in cars sold before
the company exits bankruptcy. If you want Americans to use their clunker vouchers for
a 2009 GM car in the short term, Americans will have to know that if their gas tanks
explode or brakes fail they won't be able to hold GM accountable for their injuries.
That's certainly not going to help GM dealers move their inventory. Cash-for-clunkers
will be far less effective in stimulating the economy if the government vouchers
purchase foreign-made cars.

With the American people owning GM, it is our responsibility to make sure there is coverage that makes good on GM's obligation to families injured and killed by GM cars, in the past and in the future. The price tag, in light of recent government spending on carmakers, is a small cost in order to provide for these devastated families and uphold the cause of the justice in America.