Bankruptcies Leave GM, Chrysler Defect Victims in the Dust

July 8, 2009— -- A third-degree burn is devastating to anyone, but for Terry Cole, it meant the end of a dream: walking again.

Cole, who has been confined to a wheelchair for more than 30 years, in November 2007 suffered severe burns that he says were caused by a defect in the seat of his General Motors car, a Cadillac Escalade.

Cole was told the skin damage he suffered would make it impossible for him to resume the rigorous physical therapy that had given him hope of getting back on his feet.

The 53-year-old Missouri man is one of at least 400 people suing for damages after being hurt or having family members killed in a General Motors or Chrysler vehicle. He is also one of hundreds who, thanks to the government-backed bankruptcy restructuring of GM and Chrysler, don't know if they'll ever get their day in court.

"I never thought they would throw us to the side like we weren't anything," Cole said.

The order issued late Sunday by the judge in the General Motors bankruptcy case that allowed "old" GM to sell its assets to a "new" GM -- part of GM's efforts to reinvent itself as a lean and competitive company -- also allowed the new company to free itself of injury and wrongful death claims filed before bankruptcy proceedings began. An effort to appeal the ruling met with a setback late last night after a judge ruled that such an appeal could not go directly to the 2nd Circuit Court of Appeals -- which could result in a speedier resolution -- but must be brought before a district court instead.

Under the terms now approved for GM's bankruptcy restructuring, consumers can still sue the old company, but lawyers for the accident victims say they expect that the "old GM" -- the company charged with liquidating any assets not inherited by the new GM -- won't have the cash needed to meet their claims.

The bankruptcy proceedings for fellow struggling automaker Chrysler, which concluded June 10, provided that company the same benefit and more: In Chrysler's case, the judge ruled that the car company that emerged from bankruptcy is off the hook for liability claims related to any Chrysler car manufactured before the bankruptcy proceedings, even if the claims are filed after the bankruptcy.

That means that someone injured in a Chrysler car next week, for instance, couldn't sue the company if they bought their car before June.

GM had initially sought a similar arrangement, but relented after objections from state attorneys general and consumer groups.