SoylentNews is people
SoylentNews
from the that's-not-how-reincarnation-works dept.
When a company reorganizes itself through a bankruptcy, is it the same company? And if so, is it liable for alleged wrongdoing committed by the previous version of itself?
These are questions raised by General Motors' efforts to dodge hundreds of lawsuits related to a potentially fatal ignition-switch flaw in millions of its older sedans. After receiving a stinging defeat in a federal appellate court this past summer, the automaker is now making a Hail Mary pass to the U.S. Supreme Court to try to convince judges that it has reincarnated into a seven-year-old car company free of liabilities from its previous life.
With potentially billions of dollars' worth of personal and financial injury claims at stake, the Detroit automaker's lawyers argue that allowing these lawsuits to go through would undermine an important aspect of corporate bankruptcy: giving assurance to the buyers of troubled companies that they aren't also buying a whole bunch of unexpected legal headaches.
But in GM's case there was no outside buyer. It essentially bought itself (with taxpayer money) in the wake of the mortgage-lending crisis that tipped the nation into recession and steered the American auto industry into a ditch.
(Score: 0) by Anonymous Coward on Monday December 19 2016, @03:33PM
Maybe not for us mortals, but what would prevent other companies of doing this if this creates a precedence?
(Score: 3, Interesting) by vux984 on Monday December 19 2016, @07:06PM
Maybe not for us mortals, but what would prevent other companies of doing this if this creates a precedence?
The "one weird trick" that enabled GM to do what it did is that the taxpayer was giving them the money it would need to buy itself out of bankruptcy; and special government oversight specifically to try an ensure business continuity. That's not really an option most companies have.
For what it's worth it looks like the taxpayer directly lost 10-12 billion investing in the autoindustry. But it may have saved 5-6million jobs, and that would have cost between 40-100 billion in lost tax revenue. So the lesser of two bad choices perhaps.
More interestingly, the auto bailout program was just small part of TARP, which cost about 420 billion... and has actually recovered about 430 billion. So the taxpayer has actually done ok by tarp. There was definitely some abuse by the so-called 'banksters' ... giving themselves raises and bonuses etc but, big picture, that was small potatoes.
Arguably things *might* have been even better if we'd let it collapse and the market sorted it out, but while that might have worked out better on the macro level, the churn at the personal level would have ruined 100s of thousands of households even in best case scenarios; and likely handed ownership to chinese and indian and german automakers.