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Delphi’s Liability in GM Recall Could Be Tested

Delphi Automotive's name does not appear on the outside of the 2.6 million vehicles recalled by General Motors since February, but the company is getting drawn into a mounting wave of litigation for its role in producing the faulty ignition switch that prompted the recalls.

Plaintiffs have now named Delphi, one of the largest auto parts suppliers in the world, in at least two lawsuits stemming from the recall. One was filed by a former Delphi employee whose daughter was killed in a 2013 crash involving a recalled 2006 Chevy Cobalt, the other by customers who claim the ignition problems caused their cars to lose value.

Delphi's legal exposure may hinge on how much control it had over decisions involving the design of the switch, and the terms of its four-year bankruptcy, which ended in 2009.

While Delphi made the part, GM set the specifications and ultimately approved its use, according to documents from civil litigation and congressional investigations.

Delphi spokeswoman Claudia Tapia declined to comment, except to say that the company was "working cooperatively with GM on this matter." The company has not yet filed responses to the two lawsuits. GM spokesman Jim Cain said that Delphi owned the intellectual property for the switch but declined to comment on questions of liability or lawsuits.

Even though there's no doubt that Delphi made the ignition switch, the company would likely benefit from defenses that are not available to GM, which itself faces a spate of lawsuits over the recall.

Like GM, Delphi went through bankruptcy and emerged in 2009 as a different legal entity. In purchasing "old" Delphi's assets, the new company largely shed liability for past actions. The terms of Delphi's bankruptcy asset sale preclude "successor liability," meaning that the new entity would generally not assume liabilities created by its predecessor.

GM went through a similar process and also has a so-called shield from certain kinds of liabilities. But Delphi's shield is stronger.

GM agreed to modify the terms of its bankruptcy exit to allow "new" GM to assume liability for post-bankruptcy accidents involving pre-bankruptcy products.

Delphi did not.

-Reuters