Analyst expects GM to allocate $2B for settlement fund, federal fine

In a research note distributed to investors, Barclays analyst Brian Johnson predicted that General Motors may allocate at least $2 billion for a voluntary settlement fund and for a potential federal fine.

Despite calls for a bankruptcy fraud investigation to void the pre-bankruptcy liability protection, Johnson believes attorneys are unlikely to successfully pursue such strategies in court. Nonetheless, he expects the company to channel $1 billion to $1.5 billion through its bankruptcy estate as a potential compromise to avoid a protracted legal battle.

“Notwithstanding the lack of legal liability, we believe GM will craft a settlement to put the issue behind it,” Johnson wrote, as quoted by the Detroit Free Press.

Aside from the consumer compensation funds, the automaker is also expected to take a hint from the Justice Department’s recent Toyota settlement and set aside another $1 billion to resolve a federal criminal investigation.

The company has been regularly served with new lawsuits since announcing the recall. Some plaintiffs are pursuing wrongful-death claims, while others seek damages for vehicle devaluation or the drop in stock price.

Johnson suggests GM may announce the “settlement mechanism” ahead of CEO Mary Barra testimony before Congress next week.