Consumer Watchdog to Obama: No 'Cash for Clunkers' Without Compensation for GM Victims

WASHINGTON, June 26 Consumer Watchdog called upon President Obama to prioritize the purchase of an insurance policy for victims of defective GM vehicles in the company's bankruptcy over the "cash-for-clunkers" program.

"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," wrote Consumer Watchdog President Jamie Court. "The United States government should make compensation for GM victims a priority before paying cash for clunkers... 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."

Consumer Watchdog pointed out the inappropriate priorities in the GM bankruptcy: $100 million for an insurance policy to protect its officers and directors, a policy without a deductible for the executives; $2 billion per year for GM advertising; and hundreds of millions for Wall Street advisors.

"Americans have already sunk $50 billion in GM, and analysts expect that money will never be returned," wrote Court. "How much is there to provide for those burned or killed by an exploding GM gas tank? Not a dime."

The consumer group also sent the President a "death memo" from the GM litigation files showing company managers knew about defects that would burn and kill customers but chose not to recall the cars because it was cheaper to pay out lawsuits.

"Such cold-hearted calculations should not prove prophetic," Court wrote. "You have it within your power as President to send a signal that those who have suffered from these calculations are worth at least as much as an Oldsmobile Cutlas Supreme. You simply cannot allow this injustice to stand."

Consumer Watchdog also pointed out that, "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.

"Mr. President, with the American people owning GM, it is your 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. We appreciate your attention to this matter of grave concern."