In Light of GM Recall Scandal, ‘Fear of Liability’ Grows for Automakers & Suppliers

Employment / Personal Injury / Business

The fear of liability is growing … A lot of suppliers think they are covered if they notify the [manufacturer], but [the National Highway Traffic Safety Administration] may be taking a closer look at the participants in the reporting system.

– Tom Manganello, partner and co-leader of the automotive industry group at Warner Norcross and Judd LLP in suburban Detroit.

As the deadly General Motors (GM) ignition-switch scandal and recall grows, automakers and suppliers are worried about greater regulation.  Further, earlier this month, GM fired 15 employees associated with the scandal and the National Highway Traffic Safety Administration (NHTSA) is focused on getting to the bottom of the situation as it pertains to every company involved in the process.

In a June 23, 2014 article on the Automotive News website, Dustin Walsh gives us the latest:

Automotive manufacturers must — because they can’t afford not to — protect themselves from liability in every aspect of production. Attorneys have been in overdrive since the GM recall scandal broke in February, either assisting the automaker or working with suppliers as recalls spike across the industry. Companies are feverishly working to correct potentially harmful language in documents, identify legal liabilities and prepare for the possibility of increased regulation.

On top of that, many are in a state of fear or panic.  One lawyer by the name of Dan Sharkey, who is a partner at Brooks Wilkins Sharkey and Turco PLLC of suburban Detroit, explained how he received more client calls regarding recalls in 2014 than in the previous 10 years combined.  The cause of this fear centers on the legal ramifications.  Walsh continues:

It’s the legal ramifications for GM that has the industry scrambling. The automaker has already been slapped with a $35 million fine by the U.S. Department of Transportation, is under a criminal investigation that could lead to fines and several civil lawsuits related to the faulty ignition switches linked to at least 13 deaths.

The civil suits have already dragged in suppliers Delphi Automotive, maker of the ignition switch, and Continental AG, which supplied airbags to the defective cars. The lawsuits allege Continental and Delphi knew of the issue and didn’t fulfill a duty of reporting them to the National Highway Traffic Safety Administration.

In the short term, all of this is leading to many companies being proactive in terms of employee training.  Walsh explains:

Daniel Rustmann, partner and co-chair of the global automotive practice at Detroit-based Butzel Long PC, said the “era of recalls” is causing an increase in training on liability, from top to bottom in organizations.

“The best advice I give to clients is to get their people well-educated about the laws, how to handle reporting and requests from outside the company,” he said. “This is a communication issue at its root and needs to be handled effectively.”

So, while this has been a tragedy and complete disaster on many levels, we can take solace in the fact that something is being done.  At the very least, if employees are more educated, we hope these types of issues never happen again.

If you have a legal matter related to an injury or your employment, please call our Yardley office at 215-493-8287 or send us an email HERE. We will be glad to help.

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