It looks like GM is being all schmucky again

It looks like GM is being all schmucky again

Summary: If the new GM we all own a piece of won't honor its warranties, does that mean the U.S. government is somehow going to have to pick up the tab?

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TOPICS: Legal
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Image courtesy CBSNews.com

Ah, GM. We loved them for their choo-choo train engines and we loved them for those old muscle cars like the GTO and the Smokey and the Bandit Trans Am. But while good old Detroit iron is always near and dear to any real gearhead's heart, it's hard to love GM itself.

You see, GM is being schmucky again.

We all know the story of Government Motors, the company that was too big to fail, so we bailed them out. We bailed them out to the tune of billions of taxpayer dollars and we (the U.S. taxpayers) still own something like 27% of the company.

See also: Detroit, Pimp My Ride

See also: Electrifying weekend with the Chevy Volt

So, here's what the fine folks at GM are doing. Back in 2007 and 2008, General Motors Corporation (the "old," pre-bankruptcy GM) made some bad Impalas. There were some serious problems with some 400,000 Impala suspensions.

A class action lawsuit was brought against the company demanding the company honor its warranty and fix the suspensions.

To this, the so-called "new" GM responded that they're not responsible for fixing the suspensions because those cars were sold by the "old" GM and the "new" GM is a different company. So, claims the company, it's not responsible for warranties sold with cars before it became "new" GM.

Now, as it turns out, the new GM is, technically, a separate company. But since they're trading on the same brand equity as the old GM, they're using the same plants, the same products, technology, and designs, the same engineering assets, and even the same production lines, we can be pretty sure the new GM is essentially the same company as the old GM -- except powered by taxpayer money.

So this is, apparently, how GM repays Americans. Instead of honoring warranty repairs, they throw up a legal smokescreen and try to slither away from fixing the cars they built and sold to the very same taxpayers they previously went begging to for help.

Now, as it turns out, President Obama even came out and promised that warranties, specifically from GM, were "safer than they have ever been".

So, here's the interesting question. If GM -- the new, extra schmucky GM we all own a piece of -- won't honor its warranties, does that mean the U.S. government is somehow going to have to pick up the tab? And does that mean that, once again, the American taxpayer is going to have to be footing the bill because GM's new set of senior executives are just as much gasholes as the executives of the old GM?

Oh, just in case you're curious, Daniel Akerson, GM's CEO, is expecting to take home a pay package somewhere in the range of $9 million  this year.

Since we own about 27% of the company, we Americans are paying him about $3 million this year to screw other Americans out of their warranty service.

Kind of makes you proud to be a car guy, doesn't it?

Topic: Legal

About

David Gewirtz, Distinguished Lecturer at CBS Interactive, is an author, U.S. policy advisor, and computer scientist. He is featured in the History Channel special The President's Book of Secrets and is a member of the National Press Club.

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  • RE: It looks like GM is being all schmucky again

    This is very interesting. I know several people that purchased their cars before the "New GM" that have had their car fixed under extended warranties.
    bobiroc
    • RE: It looks like GM is being all schmucky again

      @bobiroc "Extended warranties" are typically 3rd party contracts which have nothing to do with the original manufacturer (GM) and their warranty.
      ejhonda
      • RE: It looks like GM is being all schmucky again

        @ejhonda

        Well my vehicle is a 2008 which predates the bailout and and the original factory warranty just expired in May 2011 and they have not refused to do any work or repair any recalls. I only had one though and it was for the storage compartment latch that they fixed in late 2009 with no questions asked. I had difficulty getting my car repaired but I think that was due to the service techs of the dealership as I brought it to another dealership and they fixed it right up. All under factory warranty.

        Regardless this is pretty crappy of GM not to fix the issue.
        bobiroc
    • RE: It looks like GM is being all schmucky again

      @bobiroc

      How is this any different then a tech company not honoring it's products? This article is trash. This paltry sum we pay to keep GM going is nothing compared to the 1.2 Trillion the FED loaned out to Toyota and some banks. This was done secretely behind our backs so let's not cry over this.
      Rob.sharp
      • RE: It looks like GM is being all schmucky again

        @rob.sharp@...

        Still pretty crappy. Not sure if anyone remembers a company by the name of Silo. They sold electronics similar to stores like Best Buy. When they folded they refused to honor any extended warranties.

        If there is truly a design flaw with these Impala's then they should be covered regardless if it is a new GM.
        bobiroc
      • RE: It looks like GM is being all schmucky again

        @rob.sharp@... While it's true the government dumped even more billions into AIG and a number of big banks (many of which have already repaid the government) than they did into GM and Chrysler I'm not ware of any bailout of Toyota so how about backing up your statements with facts...
        simul8guy
    • RE: It looks like GM is being all schmucky again

      @bobiroc and just think of what it must be like if the car with the problem is a pontiac. not even a dealer to go to. But this is nothing new. GM has been "loosing" recall history as far back as the early 90s when they " lost" all record of the Pontiac Fiero Recall Database. I have an 88 which never got the recalls which were federally mandated after they had major problems.
      fierogt
      • RE: It looks like GM is being all schmucky again

        @fierogt Is the word "losing" too hard to use for yankees? My god, it's as if there's a plague of people "loosing" the ability to use the word properly. :(
        blueskip
      • RE: It looks like GM is being all schmucky again

        @fierogt Pontiac, Oldsmobile, Saturn,.... I have two Hummers, one from before the bailout and one from after, brand is dead and not dealerships exist anymore yet have had not issues what so every with service. Granted I have only had two minor warranty repairs as the build quality of the trucks has been excellent but what should have been covered by warranty was along with items that shouldn't have been covered but they took care of anyway. Big part of it comes down to your relationship with your dealer and their service department.
        non-biased
  • RE: It looks like GM is being all schmucky again

    1. A repair under warranty is NOT the same as issuing a recall. I seem to remember that the new GM promised to honor warranties, but it does not mean it needs to issue recalls for the "old GM" products. It SHOULD, but that does not mean it is OBLIGATED to.

    2. I still have issue with our bail-out of GM and Chrysler. The purpose was to keep them afloat, but both ended up filing for bankruptcy anyway. I'm glad they are both making come backs, but wonder how much govt. intervention helped. It probably has, but I have to wonder...
    chipmunkchuck
    • RE: It looks like GM is being all schmucky again

      @chipmunkchuck

      Well, right off the top, they aren't expected to pay income tax for at least another decade. So, now you know how it is that their "profitable" already.
      tkejlboom
    • RE: It looks like GM is being all schmucky again

      @chipmunkchuck

      The respective companies going bankrupt was part of the bailout process. The bailout allowed the companies to avoid Chapter 7 bankruptcy and restructure their debt instead.
      toadlife
      • RE: It looks like GM is being all schmucky again

        @toadlife - Wrong toady. GM did file for bankruptcy. I know because I was a shareholder of the old GM and my shares quickly became worthless afer they filed for BANKRUPTCY. The courts oversaw the restructuring of debt under BANKRUPTCY law.
        simul8guy
    • RE: It looks like GM is being all schmucky again

      @chipmunkchuck I know of one recall that GM is currently honoring on certain '06 and up vehicles. Of course this is a very cheap fix and getting some of these vehicles into the service department will in turn lead to some paid repairs so that could be a factor in that one versus a very expensive recall.
      non-biased
  • RE: It looks like GM is being all schmucky again

    Sounds like they are acting like any other major corporation. If there is a way to use the legal system to slither out of something, that's the first move to be made by the corporations legal staff. <br><br>Nothing new here. (doesn't matter who the political party of the week is, corporations are the free market, and they don't play to please you or me)
    Chris S
  • Warranties are a joke

    We all have had issues getting warranties with one product or another. GM is just trying to get around fixing junk they made. But in all honesty some of these issues stem from the climate they are expossed too. I always questioned if a auto manufacture was responsible for mother nature and the corrosive stuff we put on roads for us to be able to drive 70MPH in a blizzard. We all know car companies cut corners and unless it becomes a safety recall. The manufacture can determine how it applies its warranties.
    jscott418-22447200638980614791982928182376
    • RE: It looks like GM is being all schmucky again

      @jscott418 - Well, I have a 2002 Hyundai Santa Fe. Hyundai had a recall to deal with inadequate underbody rustproofing causing excessive suspension corrosion. They replaced the entire rear suspension under a recall and replaced the transmission under the powertrain warranty at 97,000 miles (just 3000 miles shy of warranty expiration). What they wouldn't pay to replace was the rusted out spare tire carrier. I can't gripe about that as the car was beyond the bumper-to-bumper 5yr/60K mile warranty and certainly wouldn't be covered by the powertrain warranty. Bottom line is I'd buy a Hyundai (or Kia) in a heartbeat because of the quality of the vehicles and length of the warranty. I wouldn't even set foot on a GM dealer's lot...
      simul8guy
      • RE: It looks like GM is being all schmucky again

        @simul8guy Glad to hear you are happy with your Hyundai but I do take issue with your implication that GM products are bad. I have had less issues with all the GM vehicles I have owned combined than a lot of people I know have had with each and every individual quality import they have owned. GM and the rest of the US auto makers had some serious quality issues years ago but those days are long gone. You didn't mention Toyota but they are supposedly the quality king yet a couple of years ago the worst quality vehicle in the GM (IIRC) line was actually built in a Toyota plant.
        non-biased
  • as an owner of a 2008 Impala

    My car doesn't have this issue(that I'm aware of) since I have a little over 28,000 and I am the original owner. Needless to say I think GM should be held to replace these parts. If it truly is 400,000 cars they made them, it's their responsibility bankrupt or not.
    The whole bankruptcy left a foul taste in everyone's mouth, if they ignore previous GM shortcomings due to recall or design flaw they need to fix it. If not it'll be a major black eye for the brand that they don't need
    REDPINXC
    • RE: It looks like GM is being all schmucky again

      @REDPINXC
      This is the most blatant customer disrespect out there, and people still buy their garbage. Tell me why the federal government can go after Ford Windstars from 1998 to 2003 for rear axle recalls (and all way out of factory warranty coverage) and allow potential problems from 2008 and 2009 Impalas be allowed outside of recall which most would (or should) still be under an existing factory warranty. I guess you do get treated differently when government dollars buy off union votes!
      partman1969@...