A few months ago I discussed the effect which the bankruptcy filed by Chrysler had on their liability for defective Jeep Cherokees and other vehicles that they manufactured before they declared bankruptcy.

An unintended consequence of allowing Chrysler and General Motors to file bankruptcy, was that the government not require either company to accept liability for defective and unsafe vehicles they manufactured before they declared bankruptcy.

Based upon recently disclosed information from General Motors, their engineers were aware nearly five-years ago regarding the dangerous and faulty ignition switch contained in their Chevrolet Cobalt. General Motors now admits, that their engineers’ had a meeting which confirmed these defects in May 2009. This was after at least 23 fatal crashes had occurred resulting in 26 deaths. This meeting occurred before July 3, 2009 when General Motors’ bankruptcy agreement went into effect.

It is significant to note that the government also became a significant shareholder of General Motors. This was based upon the financial bailout provided, with taxpayers’ dollars, to keep General Motors in business.

However, the government was also responsible to monitor and supervise vehicular consumer safety. General Motors allegedly reported these automobile accidents to the government under a system called Early Warning Reporting. This requires all of the manufacturers to disclose claims that they receive blaming vehicle defects for serious injuries or deaths.

Prior to now, it is significant to note that General Motors has aggressively defended several of these claims, which resulted from the faulty ignition switch design, by denying that such a defect in fact existed.

General Motors has now officially recalled 1.6 million Cobalt vehicles and other small cars, confirming that the ignition switch when bumped or weighed down with heavy key rings could cause the unexpected shut-off of the engine’s power while disabling airbags and the vehicle’s braking system.

The New York Times recently reported that by the end of 2007 General Motors had examined data from 9 sensing and diagnostic modules of crash vehicles. In 4 cases the ignition switch was in the accessory position. General Motors claims that it was not until May 15, 2009 that GM engineers verified this data.

At the very least, General Motors was in possession of sufficient information to place them on notice that there were serious and dangerous defects which existed in the design for this ignition switch before bankruptcy was finalized.

This safety defect was made even more egregious by the fact that these vehicles were marketed to either young or new drivers.

In order for families who have been tragically affected by these defects for vehicles manufactured before the date of bankruptcy, it would be necessary for the bankruptcy Judge to set aside the bankruptcy protection as it relates to these claims. He could provide relief based upon fraud by General Motors in failing to disclose this information before it completed bankruptcy.

If this relief is not granted by the Bankruptcy Court, then it would be necessary for the Justice Department to file criminal charges against General Motors. They could have them compensate the families victimized by the loss of their children while operating these unsafe vehicles as part of the criminal penalty assessed against them.

This appears to be one more example of how the government failed to protect the interests of the consumer public against the dangers of unsafe or defectively designed vehicles when taxpayer relief was provided to keep these companies in business.