WEBVTT - GM Trust Backs out of Ignition Switch Settlement (Audio)

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<v Speaker 1>When General Motors came out of bankruptcy in two thousand nine,

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<v Speaker 1>it left behind a shell of its old self. The

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<v Speaker 1>shell known as Old GM, was set up to handle

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<v Speaker 1>lingering legal claims, including lawsuits over faulty ignition switches. The

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<v Speaker 1>financial arrangements. However, we're complicated, and over the past week

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<v Speaker 1>they fostered a billion dollar disagreement. First, New GM, that's

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<v Speaker 1>the company that still makes cars, accused Old GM of

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<v Speaker 1>secretly plotting with with plaintiff's attorneys to extract more money

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<v Speaker 1>from the automaker. Now New GM has reached a deal

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<v Speaker 1>with Old GM, and that has plaintiffs lawyers crying foul.

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<v Speaker 1>With us. To help explain all of this is Eric Gordon.

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<v Speaker 1>He's a professor at the University of Michigan's Ross School

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<v Speaker 1>of Business and he's with us in our Chicago studio. Eric,

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<v Speaker 1>thanks for being with us. UM. This is kind of

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<v Speaker 1>complicated stuff, So just start, if you would, by explaining

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<v Speaker 1>exactly what old GM is and what its obligations and

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<v Speaker 1>and motivations are. Old GM is a creature of the

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<v Speaker 1>bankruptcy reorganization. In In that reorganization, GM is basically split

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<v Speaker 1>into two pieces. Old GM now referred to as the trust.

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<v Speaker 1>UM got a certain amount of money, a lot of money,

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<v Speaker 1>billions of dollars, and some property. It got some old

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<v Speaker 1>plants and some property, and it's a liquidating trust. It's

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<v Speaker 1>designed to pay off the obligations that had to be

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<v Speaker 1>paid off under the agreement, the bankruptcy agreement. New GM,

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<v Speaker 1>or what you and I think of as GM today,

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<v Speaker 1>got spun off as supposedly a clean, new, fresh start entity.

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<v Speaker 1>That's the purpose of bankruptcy reorganization UM, so that you

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<v Speaker 1>know it could still make cars and still employ people.

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<v Speaker 1>Turns out it hasn't been one fresh start. There's some

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<v Speaker 1>there's some dangling kind of threads here, UM, including the

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<v Speaker 1>billion dollar thread you mentioned Eric. Last week, we understood

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<v Speaker 1>and there was a report that GM had old GM,

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<v Speaker 1>that trust had settled with plaintiffs lawyers. What happened? Yeah,

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<v Speaker 1>So apparently apparently the old GM, the trust, and the

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<v Speaker 1>plaintiffs lawyers, who have you been involved in some lengthy

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<v Speaker 1>settlement negotiations over some big big bucks got together and

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<v Speaker 1>finally hammered out a deal they were happy with. They

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<v Speaker 1>being those two old GM and the plaintiffs lawyers. Apparently

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<v Speaker 1>UM New GM was not involved in that wasn't part

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<v Speaker 1>of the negotiations. UH and found out that as part

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<v Speaker 1>of those negotiations, the two parties, Old GM and the

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<v Speaker 1>trust O g M and the plans managed to hammer

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<v Speaker 1>out a deal which pulls one of those threads, the

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<v Speaker 1>billion dollar thread UM and GM. New GM is not

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<v Speaker 1>happy about that for a number of reasons. I mean,

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<v Speaker 1>maybe for a billion reasons, but for some you know,

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<v Speaker 1>very specific reasons. And so now we have a new

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<v Speaker 1>agreement that I guess maybe supersedes the old old agreement.

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<v Speaker 1>This is between new GM and old GM. Tell us

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<v Speaker 1>about about that. So the old agreement apparently was never signed,

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<v Speaker 1>certainly wasn't approved by the court. UM New GM voiced

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<v Speaker 1>in some very strong words, it's disapproval of that agreement,

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<v Speaker 1>and it's a disapproval of the conduct of both the

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<v Speaker 1>plaintiffs lawyers and old GM in reaching it. Apparently got

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<v Speaker 1>together with old GM. Um and made its displeasure clear,

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<v Speaker 1>but also made Old GM and offer it didn't want

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<v Speaker 1>to refuse, which is UM. Look, we will UH cover

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<v Speaker 1>legal feest to litigate some issues we New GM want

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<v Speaker 1>to have litigated. You weren't going to litigate them. Who

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<v Speaker 1>knows why GM suspects there was a little sort of

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<v Speaker 1>hand holding between old GM and the plaintiffs, but even

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<v Speaker 1>if not, maybe old GM just didn't want to spend

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<v Speaker 1>the money. So new GM said, Okay, we'll here, we'll

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<v Speaker 1>bring something to the table. We'll cover some legal fees.

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<v Speaker 1>And under this new agreement between old and new GM,

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<v Speaker 1>this time the plaintiffs lawyers are left out. Um, new

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<v Speaker 1>GM is going to cover some legal fees and apparently

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<v Speaker 1>all GM is going to litigate some defenses that the

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<v Speaker 1>GM hopes will prevail and keep it from having to

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<v Speaker 1>pay that billion dollars. Eric, I understand the judge scolded

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<v Speaker 1>all the lawyers on on all the sides out of hearing.

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<v Speaker 1>Why ye, Well, for two reasons. One, judges like settlements,

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<v Speaker 1>especially settlements that have been you know, underway for quite

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<v Speaker 1>a long time. You'll walk into a judge's courtroom at

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<v Speaker 1>the last minute and say, oaps, look the settlement that

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<v Speaker 1>we've been working on forever. Uh, nope, we've got We've

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<v Speaker 1>got something new. So so Judge Glenn. Judge Glenn, like

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<v Speaker 1>any judge, is not happy about that. But the plaintiffs lawyers,

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<v Speaker 1>a plaintiffs lawyer at least ed wise fell in there,

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<v Speaker 1>Um referred to, well, it must have been the result

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<v Speaker 1>of threats, some pretty heavy duty threats that GM made,

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<v Speaker 1>New GM made to old GM. Um. He did admit

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<v Speaker 1>that he doesn't know that those threats exist, but but

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<v Speaker 1>he he said that sort of they must have. So

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<v Speaker 1>the judge got pretty angry about that and has ordered

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<v Speaker 1>both sides to produce evidence that there were or were

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<v Speaker 1>not threats. Um so that the judge, you know, and

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<v Speaker 1>they just just blew up into Judge's face and he

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<v Speaker 1>is not a happy guy. We're gonna have to leave

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<v Speaker 1>it there, Thank you so much. Eric Gordon and the

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<v Speaker 1>professor at the University of Michigan's Ross School of Business.

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<v Speaker 1>Coming up on Bloomberg Law legal victory for Uber as

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<v Speaker 1>it tries to keep a price fixing suit out of court.