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General Motors Settles 3rd Ignition Switch Case Out of Court

Share price of General Motors Company GM dropped 0.2% to $29.37 on Apr 8 after the company announced the settlement of the third ignition switch case against it.

The case was filed in Nov 2013 by the widow of a victim who died in a crash in Manhattan. The accident was caused by a defective ignition switch that prevented deployment of the airbags in the 2006 Saturn Ion the victim was driving. However, the terms of the settlement have not been disclosed. Meanwhile, the victim’s lawyer had made clear that the crash was a result of a faulty ignition switch that stopped abruptly, deactivating the brakes and the power steering system of the vehicle. This had made the driver lose control, resulting in a crash which claimed the victim’s life on Dec 8, 2013.

This year, around six defective ignition switch cases were supposed to go on trial. The first case was dissolved after General Motors identified a misleading testimony. In the second case, the jury decided that the defective ignition switch was not the reason behind the crash. The third case, unlike the other two cases, had resulted in the death of the driver. However, the case was settled out of court.

General Motors has been facing the brunt of delayed recalls for around 2.6 million vehicles with faulty ignition switches. The company issued a recall in Feb 2014, although the problem was identified way back in 2001. So far, the automaker has recalled around 30 million vehicles owing to this issue.

Meanwhile, General Motors has coughed up $2 billion as settlements for the defective ignition switches with the U.S. Justice Department, shareholders and consumers. The automaker launched a program to compensate the families of the victims and set a compensation fund of $600 million. The company also paid around $575 million to resolve shareholder litigations and to settle death and injury claims. General Motors also paid a fine of $900 million in the third quarter of 2015 and signed a Deferred Prosecution Agreement with federal prosecutors related to criminal charges for not disclosing the ignition switch defect and thus misleading consumers.

Zacks Rank & Key Picks

General Motors currently carries a Zacks Rank #3 (Hold).

Better-ranked automobile stocks include Federal-Mogul Holdings Corporation FDML, Cooper Tire & Rubber Co. CTB and Superior Industries International, Inc. SUP. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
SUPERIOR INDS (SUP): Free Stock Analysis Report
FEDERAL MOGUL-A (FDML): Free Stock Analysis Report
COOPER TIRE (CTB): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
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