General Motors Company (NYSE:GM) is hit with more bad news. The Arizona Attorney General’s office has announced it plans to file lawsuit against the automaker, seeking damages of $3 billion on allegations that the auto company defrauded consumers over the past several years with the heavy recall numbers and safety defects. One of the key points the attorney general argues, is the 2.6 million cars that contained the faulty ignition switch over a number of years and was responsible for numerous fatal crashes. Arizona AG says that General Motors knowingly mislead customers through marketing campaigns to purchase its faulty cars and then hid from being held responsible through the company’s slogan of “New GM” after it came out of bankruptcy in 2009. “It manufactured and sold millions of vehicles that were not safe, including hundreds of thousands in Arizona, and it failed to remedy serious defects in millions of older G.M.-branded vehicles” reports the AG’s office.
Additionally, after 4,800 consumer complaints, 30,000 warranty repairs, and CEO Mary T. Barra’s awareness of the issue back in 2011, the company still waited an additional 3 years to make an announcement or fix the problem. Arizona officials say that 300,000 of the recalled General Motors Company (NYSE:GM) cars affected by the ignition issue and power steering occurred in their state and at a standard fine of $10,000 per incident, the bill totals to $3 billion.
A beginning of a barrage of lawsuits and settlements with General Motors
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Arizona’s lawsuit is just the beginning of what could be a barrage of lawsuits and settlements with General Motors Company (NYSE:GM) over its various issues with faulty cars and keeping them on the road, despite knowing their risk. Other organizations such as the National Highway Traffic Safety Administration and highway safety officials from Canada have already fined General Motors $35 million for failing to act swiftly and correct the problem in a timely manner. The Securities and Exchange Commission and the US Justice Department are also investigating and spending leveeing fines on the disgruntled automaker.
General Motors Company (NYSE:GM) is just in the beginning of a potential consumer backlash that cost the lives of dozen people and many more with injuries. How do you expect to keep churning out sales, when you have clear evidence of knowledge of faulty cars that are potentially life threatening and choose not to do anything for 3 years, that is not only acting against benefit of customers, but that is criminal. It should definitely be interesting to wait and see what the Justice Department finds in its investigation and whether they find that this is a criminal matter that could result in arrests. Overall, General Motors has made a very big mistake and it will certainly stick around in potential buyer’s heads for years to come when they go to look for new car purchases. There will have to be some very big changes and developments to occur in order to get customers back on your side and with favorable opinion.