When the United States government bailed out U.S. car companies Chrysler and General Motors two years ago, the common justification thrown around was that the automakers were “too big to fail.” Certainly, if the government had not intervened and the companies had gone bankrupt, several thousand Americans would have been out of work and the United States economy would have suffered greatly.
However, one harmful effect of the bailouts has been largely ignored by the government, the media and the public: the thousands of asbestos lawsuit plaintiffs in Illinois and throughout the country who will now go uncompensated for the personal injuries they suffered from their employment at Chrysler or GM.
Under the terms of the bailout, many of the banks and individual bondholders who had lent Chrysler and GM money or extended them credit were repaid in full. Several other creditors, including those who had unwillingly become so after suffering asbestos-related injuries in an auto factory, saw their hard-fought damage awards and settlements completely wiped out.
The $50 billion GM bailout and $12.5 billion Chrysler bailout effectively erased the liabilities owed to asbestos victims and their families, even when the companies had agreed to or had been ordered to pay multi-billion dollar awards to plaintiffs. In addition, the majority of plaintiffs who had personal injury lawsuits pending at the time of the bailouts will likely never see their cases resolved. Although this is undeniably unfair, it is perfectly legal under U.S. bankruptcy law.
Many victims have vowed to fight for their rightly-deserved damage awards. Currently, there are approximately 2,500 litigation claims with a total value of about $3 billion in damages pending before GM’s bankruptcy estate. It remains to be seen whether these cases will have a positive result.
Source: Wall Street Journal, “Car Bailouts Left Behind Crash Victims,” Mike Spector, 27 May 2011