GM Fights Cash-for-Coupons Plan
Concerned about settlement costs in a huge pickup truck class-action case, General Motors is trying to block a plan to help millions of truck owners to swap vehicle discount coupons for cash.
GM lawyers are asking a state court judge in Louisiana to bar class members from directly transferring settlement coupons to Certificate Redemption Group, a Houston firm created to serve as a secondary market for the discounts.
The litigation was filed in 1992 amid allegations that the position of fuel tanks outside the trucks’ protective frame had caused scores of fatal vehicle fires. GM, which has always maintained that the full-size pickups are safe, agreed to a settlement in 1996. But the deal has been repeatedly stalled by objections and appeals over logistical details.
The centerpiece of the deal is the offer of a discount to each class member toward purchase of a new vehicle. The coupon will be worth $1,000 if used by a class member or family member, or $250 when transferred to a third party. Those eligible are the more than 4 million individuals and fleet operators who, as of July, 1996, were owners of 1973-86 C/K pickups, or 1987-91 R and V model trucks. The total number of affected vehicles is 5.8 million.
Because relatively few plaintiffs are expected to use the discounts, or find a buyer on their own, consumer groups and plaintiffs’ attorneys say only a small percentage will benefit unless there is a ready market for their coupons. Depending on how many coupons are turned in, GM’s redemption costs could range anywhere from less than $100 million to more than $1 billion.
The latest flare-up followed an apparent breakthrough last Wednesday, when GM mailed notices telling truck owners how to apply for their coupons.
Plaintiffs’ lawyers immediately sent letters of their own, informing their clients that CRG would buy the coupons for $100 apiece from those not planning to use them.
CRG plans to resell the coupons for $150 to $200 each to volume purchasers, such as fleet operators and leasing companies, who would then get $250 off each new vehicle. Since last week, CRG has received more than 200,000 inquiries on its Web site, https://www.certificaterebates.com, and to a toll-free number, (800) 317-4997, spokesman Mike Hedge said.
The letter from plaintiffs’ lawyers enclosed a form that class members could fill out to transfer their certificates to CRG. On Friday, GM filed court papers in Louisiana, asking a judge to rule that, under the settlement, coupons can go directly only to members of the class.
“The safety activists and trial lawyers . . . [have] grossly misrepresented the terms of the class-action settlement,” GM said in a statement issued Monday.
If GM prevails, it appears that class members would have to apply for their coupons, then fill out and mail in a second set of papers to transfer them to CRG. The more red tape, the fewer coupons obtained and used, GM critics say.
GM is “squealing like a stuck pig” rather than live up to the terms it negotiated, said Don Barrett, plaintiffs’ lead counsel.
Barrett appeared Monday at a news conference in Washington, where the Center for Auto Safety and Public Citizen unveiled a replacement fuel tank for the trucks that they said will be less vulnerable to gasoline leaks and fires. But the groups said they are still seeking a manufacturer to mass-produce the tanks.
The replacement tank has thicker steel and is designed to fit inside the frame rails of the trucks, reducing the risk of it being crushed, the groups said. The tank was developed by safety researcher Kennerly H. Digges, a former official with the National Highway Traffic Safety Administration. The work was supported by a contribution of $1 million from the class-action lawyers, taken from the $26 million they negotiated in fees and costs.
Safety advocates said the cost of the tanks probably will be about $125, plus installation. They said that a manufacturer has agreed to produce the tanks, but only if at least 20,000 are ordered.
GM blasted the announcement of the new tank as “irresponsible and self-serving. There is no design defect in the fuel systems of these old full-size pickup trucks,” the company said.
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Levin reported from Los Angeles and Kaplan from Washington.
