Bloomberg News

GM’s Barra Sued With Board Over Response to Ignition Defect (1)

March 28, 2014

General Motors Co. (GM:US) Chief Executive Officer Mary Barra and GM directors were sued over the delayed recall of vehicles with faulty ignition switches in what may be the first such case seeking damages on behalf of the company.

The biggest U.S. automaker recalled about 1.6 million cars this year after faulty ignition switches that turned off power to the car and its airbags when jostled were linked to 12 deaths. Barra is to testify before congressional panels next week about why it took GM more than a decade to fix the flaw after the first customer complaints.

“The fact that GM took so long to address the deadly problem is inexcusable,” investor Richard Hockstein said in a complaint filed today at the federal court in Detroit.

Barra, Chairman Theodore Solso, former CEOs Daniel Akerson and Edward Whitacre and the others failed in their duty to the company, exposing it to billions of dollars in potential liability, Hockstein alleged. He also accused them of wasting corporate assets.

Jim Cain, a spokesman for the Detroit-based automaker, declined to comment on the lawsuit.

GM last week was named as a defendant in a shareholder’s lawsuit claiming its prior representations that the cars it makes are safe amounted to misstatements that defrauded consumers. It is also the target of consumer lawsuits filed in Michigan, California and Texas.

Damages Demand

Hockstein, in what is called a derivative suit, is seeking unspecified money damages payable to the company by the individual defendants. He also asked for a court order compelling GM to take “all necessary actions” to reform and improve its corporate governance.

Barra apologized at a March 18 press conference for the lag in dealing with the issue and the lives lost. The CEO said it took too long for GM to recall the defective cars and that the company’s goal is to ensure “something like this will never happen again.”

The case is Hockstein v. Barra, 14-cv-11277, U.S. District Court, Eastern District of Michigan (Detroit).

To contact the reporter on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net. Charles Carter, Fred Strasser


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