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GM Faces Lawsuits Claiming Car Value Has Dropped Due to Recalls

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Reuters recently reported that General Motors (GM) has been hit with a new class action lawsuit filed in a California federal court. Lead plaintiff Anna Andrews claims the company should pay damages to customers who own a GM vehicle because of the diminished value of these vehicles in the face of GM’s ignition switch problems.

Since the beginning of the year, GM has recalled millions of vehicles due to defective ignition switches that could turn off while the vehicle was running. The resulting power shutdown could stop air bags from deploying during an accident. GM has linked the problem to about 13 deaths and over 30 crashes, though the Center for Auto Safety released a report in March 2014 estimating the potential deaths to number higher than 300.

Plaintiffs Seek Class-Action Status for GM Vehicle Owners

Andrews and her personal injury attorney filed the lawsuit on June 18, 2014, in Riverside, California. They seek class-action status for GM car and truck owners who leased or sold their vehicles between July 10, 2009 and April 1, 2014. If approved, the case would include an estimated 15 million car owners.

According to court documents, GM knew about the defects in their vehicles, but concealed that knowledge from consumers, leading to recalls of more than 20 million vehicles so far this year. All of these recalls, the plaintiffs claim, have hurt GM’s reputation, and caused late-model vehicles to lose up to $2,600 in resale value.

Andrews, a California resident, stated in the case that had she known about the defects in her 2010 Buick LaCross, she would have paid less for it, or avoided purchasing it. She added that the company’s conduct in dealing with the ignition switch defect has tarnished their vehicles, affecting consumer’s perceptions of what they are worth at resale.

The plaintiffs’ attorney has estimated the damages to be more than $10 billion.

Another Similar Lawsuit Filed in Texas

This isn’t the first lawsuit to be filed concerning the alleged diminished value of GM vehicles. In March 2014, for example, the Insurance Journal reported the company was named as defendants in a lawsuit filed in Texas on behalf of all vehicle owners affected by the recall. The plaintiffs seek $6-10 billion in damages, claiming the company should be held liable for concealing the defects in their vehicles and consequently causing a drop in value.

In February 2014, USA Today reported that GM knew as far back as 2004 that its Chevrolet Cobalt had a defective ignition switch, yet failed to take proper steps to protect public safety. They did create a new key cover to limit the number of additional items that could be added to the key ring (they believed weight to be a factor in causing the switch to move to the “off” position), and sent a technical service bulletin to dealers in 2005 advising them to install the cover if customers complained, but did not tell dealers to put it on new Cobalts before sale. They also failed to warn consumers about the potential problem with the switch, and didn’t recall the vehicles for a mandatory repair until this year.

GM faces a growing number of lawsuits concerning the ignition switch defects, as well as investigations by the Justice Department and the Transportation Department.