This claim, which appears in many news articles, should sound strange to a bankruptcy lawyer. Owners of defective cars manufactured before GM’s bankruptcy in 2009 have claims again Old GM, which no longer exists, not New GM. In fact, as is standard in large corporate bankruptcies, a new entity was created, a pot of money that victims of Old GM can sue. That entity is called Motors Liquidation Co. I don’t know the details, but it appears–and this is standard–that some of Old GM’s assets were put in ML, so that victims who discover themselves as such post-2009 can collect damages against somebody. Of course, those victims (probably) cannot collect 100 cents on the dollar, but that is always what happens in bankruptcy.
Old GM’s shareholders were wiped out; New GM’s shareholders are Old GM’s creditors or people to whom those creditors sold their shares. There is no reason to hold any of these people liable for the sins of Old. An easy way to think about this is to imagine that Old GM had been liquidated, its Ion and Cobalt factories sold to investors. It would make no sense to make those investors liable for defects in cars manufactured in those factories before they bought them.
But this creates an odd situation. New GM might inspect its records or receive complaints and realize that those old Ions and Cobalts are defective. Does it have an obligation to alert the owners of cars manufactured by some other company (that is, Old GM)? To fix the cars? It appears that some such obligation exists in federal regulatory law. There is an interesting question here what would happen if GM had been liquidated and these lines of cars discontinued, and its assets divided among multiple companies. I suppose in such a case, no one would bear the obligation to recall and fix. Such a rule would make liquidation more attractive to creditors than reorganization, all else equal, which is not a good thing.
So what of the claim that New GM is hiding behind bankruptcy law? Maybe the argument is that New GM delayed the recalls because any fines levied on it by NHTSA would be minimal, less than the cost of fixing the cars, while tort liability is zero thanks to the bankruptcy. This wouldn’t surprise me. But it seems like a hole in the law that Congress should patch, and the way to patch it is not self-evident–again because burdening new firms with liabilities arising from the activities of predecessors will make reorganization unattractive relative to liquidation. It is not clear that that New GM has acted in a blameworthy fashion by minimizing its responsibility for liabilities that belong to Motors Liquidation.