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Exploring GM’s payout plan for ignition switch victims

June 30, 2014 at 6:28 PM EST
To compensate victims of its deadly ignition switch problems, General Motors will pay at least $1 million for each death, plus $300,000 to surviving family members. Kenneth Feinberg, who has previously run high-profile funds for victims, will administer the GM program. He joins Jeffrey Brown to discuss the settlement.
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JUDY WOODRUFF: General Motors announced far more safety recalls today, this time an additional 8.4 million vehicles worldwide. The automaker said it is aware of seven crashes, eight injuries and three fatalities related to the recalled vehicles. GM said it knows of problems with the ignition key’s rotation.

The models, which include Cadillacs, Chevy Malibus and Impalas, among others, were sold between 1996 and 2014. That news came just hours after terms for a victims compensation fund were announced. That fund will have no cap, and the fund’s administrator said he will do whatever it takes to resolve each and every claim.

Jeffrey Brown has our coverage.

JEFFREY BROWN: More than 250 million cars are on American roads, and six months ago, General Motors recalled 2.6 million of them for potentially deadly ignition switch problems.

The automaker had known about the problem for more than a decade, and ultimately acknowledged its role in at least 13 deaths. Today came the details on a compensation fund for victims.

KENNETH FEINBERG, Administrator, GM Compensation Fund: I want to explain a bit the dollars and the compensation that is available under the program.

JEFFREY BROWN: Kenneth Feinberg has previously run a number of high- profile funds for victims, including after 9/11 and the Gulf oil spill. Now, he will administer the GM program. He says there will be no cap on damages for anyone who’s eligible.

KENNETH FEINBERG: The driver, any passengers in the automobile, any pedestrian, any occupant of a second vehicle involved in the accident, all eligible to file a claim.

JEFFREY BROWN: The fund covers Chevrolet Cobalts, Saturn Ions and other models. It will pay at least $1 million in pain and suffering for all deaths, as well as lost compensation, plus $300,000 to surviving spouses and children.

Some of the relatives were on hand for Feinberg’s event in Washington, including Laura Christian and Rosie Cortinas, both of whom had children killed in GM vehicles.

LAURA CHRISTIAN: It’s really not about the money. It just isn’t. It’s really about making sure that — for me, that each and every single person that died is acknowledged.

ROSIE CORTINAS: No, I just want General Motors to be responsible for the deaths of all these others who cannot speak for themselves. And that is the reason we are here and making the sacrifice of being here.

JEFFREY BROWN: Today’s recall announcement applies to older midsize cars. GM and its CEO, Mary Barra, have also announced other recalls this year now covering 28 million cars.

And we dig into the questions surrounding this settlement fund with its administrator, Kenneth Feinberg.

And, Ken Feinberg, welcome back to the show.

KENNETH FEINBERG: Thank you.

JEFFREY BROWN: One obvious difference, I think, here from past instances you have been involved with, these are old cases, right, with little physical evidence left?

(CROSSTALK)

JEFFREY BROWN: So how do you resolve them?

KENNETH FEINBERG: That’s the challenge.

Most of the — or a good portion of the automobiles are long gone. There may still be black box data from the EDR, from the computer in the car, but police reports, insurance reports, warranty and maintenance reports, photographs of the accident, very important — some of these cases have been litigated. Let’s look at the trial testimony or the depositions that were taken.

We will work with every claimant to try and maximize the likelihood that we will look at all the evidence.

JEFFREY BROWN: To what level of certainty will you require?

KENNETH FEINBERG: We will require that the ignition switch be found by the administrator — not GM, by me — to have been a substantial cause of the accident.

And if we find that, for not only the driver, but these other individuals that you referenced in your — or I referenced today, they’re all eligible to file a claim.

JEFFREY BROWN: But it is true in this case. And it seems — it is different. You are more of a decision maker in determining cause and effect or…

KENNETH FEINBERG: That’s right.

(CROSSTALK)

JEFFREY BROWN: … what happened.

KENNETH FEINBERG: I have sole discretion under this program, agreed to by General Motors.

Once I make a final determination as to eligibility or value, GM cannot second-guess it. GM must honor my decision.

JEFFREY BROWN: Do you have — do you know how many claims there will be, how many victims? Do you have any idea?

KENNETH FEINBERG: I will not speculate. Until people file and demonstrate what it is that they’re alleging, I’m extremely reluctant to speculate about deaths or catastrophic injuries, like paraplegics or brain injuries. We will have to take a look at each file.

JEFFREY BROWN: One issue it seems as though you batted away quickly today is this contributory negligence. That’s whether a person, for example, was drinking when this happened.

KENNETH FEINBERG: That’s right.

JEFFREY BROWN: You’re taking out as factor?

KENNETH FEINBERG: Absolutely irrelevant, drinking, speaking, texting on a cell phone and not paying attention, contributory negligence, a big issue in the courtroom. Here, under this fund, we have no interest in looking at that.

JEFFREY BROWN: Because — why? Because it’s a…

KENNETH FEINBERG: This is a program designed to compensate victims with an automobile defect they didn’t know about at the time.

And whether they contributed to the accident or whatever is really irrelevant to the issue at hand: Did the defect cause the accident?

JEFFREY BROWN: So people could get from a few thousand dollars perhaps to millions? How do you — you have done this so many times. What’s the formula in a case like this?

KENNETH FEINBERG: The basic formula is the same formula that you see every day in the courtroom, at least for the deaths and the most catastrophic injuries. What would the victim have earned over a lifetime but for this tragedy?

Second, what about pain and suffering and emotional distress? Add those numbers together, and it might be millions and millions of dollars. We will see based on the nature of the claims that come into the program.

JEFFREY BROWN: But it is a formula, so there’s — that takes away some of your discretion, in a sense.

KENNETH FEINBERG: Some of it.

But any claimant — it’s an interesting issue you pose. Any claimant who comes me and says, Mr. Feinberg, your formula doesn’t take into account extraordinary circumstances.

I have heard some cases. One lady has lived for 10 years with a felony conviction for reckless driving because no one knew at the time. They blamed her. Nobody knew at the time it was the switch. That lady has an extraordinary claim here, and we will go outside the formula and take a look at those unique characteristics.

JEFFREY BROWN: This is a case — and I think BP was also — where you were hired by the company to help settle.

GM, of course, has been under extreme criticism for keeping this to itself. What is your situation — your relationship with GM? What is your experience so far in terms of their cooperation?

KENNETH FEINBERG: First of all, they have been extraordinarily cooperative. Mary Barra has lived up to her promise in terms of cooperating completely with me and the team that we have assembled in trying to design this program.

I have no complaints whatsoever. I think the plaintiff lawyers around the country, Bob Hilliard and Lance Cooper and Elizabeth Cabraser and others have been extremely cooperative. The Center for Auto Safety, Joan Claybrook’s group, very, very cooperative.

So everybody’s cooperated. I don’t think, A, that anybody is perfectly satisfied with my plan. The perfect is the enemy of the good to me. And, secondly, the fact I am being paid by GM is a challenge.

JEFFREY BROWN: Yes.

KENNETH FEINBERG: People look at that and, understandably, are skeptical.

JEFFREY BROWN: Right.

KENNETH FEINBERG: And the only way you get around this skepticism is get the money out and get it out fast.

JEFFREY BROWN: Well, I was going to say that — that did hit you in BP, for example, where you faced some criticism.

KENNETH FEINBERG: Between the eyes.

JEFFREY BROWN: Right.

All right, the lessons…

(CROSSTALK)

KENNETH FEINBERG: And the way we got around that…

JEFFREY BROWN: Yes. OK.

KENNETH FEINBERG: The way we got around that in BP, you will recall, in 16 months, we paid out $6.5 billion and honored over half-a-million claims.

And the same thing here. Until we actually get money flowing — and this is a voluntary program. Nobody has to participate. Until we get money out the door, that skepticism is sure to continue.

JEFFREY BROWN: And just to be clear, it’s beyond your purview of what you’re doing, but none of what you’re doing ends investigations that might lead to criminal charges against the company.

KENNETH FEINBERG: This has nothing to do with that. This is all about compensating innocent victims through no fault of their own, and we’re determined to try and maximize that compensation once they demonstrate that they have an eligible claim. And we will work with them in trying to get that demonstrated.

JEFFREY BROWN: And, briefly, what’s your timeline? How quickly do you want to get this done?

KENNETH FEINBERG: We will begin accepting claims August 1. People can file a claim until December 31 of this year.

So they have a quick timeline. And once that claim comes in, and we find that it is complete, it’s substantially complete, with documentation, we will pay these claims, the simple claims, within 90 days, and the more complicated claims, no more than 180 days, which contrasts I think very well with the alternative, which is litigating in the courtroom.

JEFFREY BROWN: All right.

Kenneth Feinberg, thank you so much.

KENNETH FEINBERG: Thank you.