DETROIT (TheStreet) -- "There is no ceiling" to what GM (GM - Get Report) will pay out to victims of crashes caused by defects in the cars' ignition switches, compensation expert Kenneth Feinberg said Monday.
Nevertheless, GM shares were flat following the announcement. The stock rose 0.1% to $36.66.
Feinberg, whom GM selected to oversee a compensation plan that experts suggested could distribute a billion dollars or more, spoke at a press conference at the National Press Club in Washington. He declined to estimate the cost to GM.
"GM has basically said whatever it costs to pay any eligible claims under the protocol they will pay it," Feinberg said, according to The Associated Press. He noted that GM will not know the total amount of the claims until May 2015. Feinberg said he was not considering whether alcohol, speeding or the absence of seat belts contributed to a crash, noting, "We have no interest in evaluating any alleged contributory negligence on the part of the driver." However, he said payment would be limited to people injured in crashes caused by the ignition switches. GM has acknowledged that faulty ignition switches contributed to 13 deaths, and it has recalled 2.6 million cars this year to replace the switches, which could unexpectedly shut off the engine, eliminating power steering and braking capability. Also, the lack of power means air bags wouldn't inflate. Feinberg, who oversaw the distribution of a $7 billion government fund to victims of the Sept. 11, 2001, terrorist attacks, said he would use a similar methodology to determine claims based on age, earnings potential and extent of injuries. Feinberg also oversaw compensation for victims of the Boston Marathon bombings, the 2007 shooting at Virginia Tech and the BP oil spill. "GM has agreed that it cannot challenge my ultimate determination," Feinberg said. "They have no right to appeal." In a brief prepared statement, GM CEO Mary Barra declared: "We are pleased that Mr. Feinberg has completed the next step with our ignition switch compensation program to help victims and their families. We are taking responsibility for what has happened by treating them with compassion, decency and fairness. To that end, we are looking forward to Mr. Feinberg handling claims in a fair and expeditious manner." In an interview with The Detroit News, Feinberg said: "GM understands. GM wants to do the right thing -- and the right thing is paying people who can document their claims, and that's a challenge. "I would not dare estimate how many deaths or how many injuries until people file their claim and we evaluate the claim," he said. TheStreet Ratings team rates GENERAL MOTORS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate GENERAL MOTORS CO (GM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- GM's revenue growth trails the industry average of 20.9%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 141.26% to $1,976.00 million when compared to the same quarter last year. In addition, GENERAL MOTORS CO has also vastly surpassed the industry average cash flow growth rate of 40.62%.
- The debt-to-equity ratio is somewhat low, currently at 0.89, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- GENERAL MOTORS CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, GENERAL MOTORS CO reported lower earnings of $2.35 versus $2.93 in the prior year. This year, the market expects an improvement in earnings ($3.13 versus $2.35).
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: GM Ratings Report
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