Report: Automaker bankruptcies will have a chilling effect on recalls

A new report predicts that a loophole created by the bankruptcies of General Motors and Chrysler will make it possible for the companies to avoid issuing recalls of defective cars built prior to the filings. The research firm posits that vehicles with safety defects sold before the bankruptcies will continue to cause deaths and injuries long after the companies emerge as new entities.

The report, released by Safety Research & Strategies, examines the consequences of a provision in the GM and Chrysler bankruptcies that allows the automakers to shed liability for the vehicles built pre-bankruptcy. "Based on data provided by both automakers to the National Highway Traffic Safety Administration (NHTSA), more than 3,400 Americans will be injured or killed by a defective Chrysler or GM vehicle during the first year of the post-bankruptcy era," the report states.

Our Cars Blog has been following the liability issue after questions were raised about whether standard consumer protections would apply to owners of GM and Chrysler vehicles. In their bankruptcy proceedings, both companies sought protection from pending and future liability claims against their products manufactured before their Chapter 11 filings.

Because NHTSA uses death and injury data to scan for defect trends, the absence of such claims might decrease the number of recalls and remedies conducted by the automakers after their bankruptcies. "If the claims aren't filed, we lose an important defect surveillance tool," said Sean Kane, president of Safety Research & Strategies. "And if the companies bear no liability for deaths and injuries caused by the uncorrected defects, what incentive do they have to recall?"

Between the third quarter of 2003 and the fourth quarter of 2008, Chrysler fielded 3,497 death and injury claims; GM fielded 15,284, according to the report. These represent an annual average of 636 and 2,779 casualties (individual deaths and injuries) respectively. With more than 40 million vehicles in the U.S. fleet, the two companies accounted for 47 percent of all claims filed against auto manufacturers during that time period. Yet, GM and Chrysler represent only 38 percent of the market share

From 2004 to 2008, Chrysler issued 109 recalls, affecting 11.4 million vehicles; GM launched 129 recalls, affecting 19 million vehicles. "Combined, GM and Chrysler have a disproportionate share of the claims," said Kane. "And there is every reason to conclude that the injury and death rates will continue. But the claims will disappear and that will impact the rate of GM and Chrysler recalls and public safety in the future."

The report features a state-by-state breakdown of Chrysler and GM death and injury claims: Texas, California, Florida, Ohio and New York lead the nation.