FORTUNE -- General Motors CEO Mary Barra wants us to think she means business. In hearings before Congress this week, Barra has stressed that she's doing everything in her power to understand how the company could have built faulty ignition switches linked to 13 deaths and why it took the company nearly 10 years to reveal and rectify the company's mistakes.
The public will likely demand more than just discovering why these things happened -- it will also request restitution and amends. Which is likely why the company has retained Kenneth Feinberg, the lawyer responsible for administering the September 11th victims fund and the BP Gulf Oil spill compensation fund. According to GM (GM), Feinberg has been hired to, "explore and evaluate options in its response to families of accident victims whose vehicles are being recalled for possible ignition switch defects."
Of course, what other response could GM possibly be exploring beyond monetary compensation?
The company isn't actually legally responsible to compensate victims because the accidents in question happened before GM's 2009 bankruptcy. The bankruptcy process alleviated GM of any liability for accidents that happened before 2009. Such defenses, of course, aren't going to fly in the court of public opinion. But how will GM decide how much to compensate victims, and can the company actually afford to be generous? GM has been a troubled company for decades -- its U.S. market share collapsed from 63% to 20% between 1980 and the time of its bankruptcy.
What's more, the automaker's main U.S. competitor Ford (F) has been thriving, gaining more market share in 2013 than any major automaker. So does GM have the wherewithal to spend big on its recall and a victims fund? According to Morningstar Analyst David Whitson, absolutely. He wrote in a note to clients this week that he would not change his estimate of GM's value, even in the face of a recall and regulatory settlements that could cost billions of dollars. Writes Whitson:
It is important to remember that even payouts by GM of several billion dollars would not drastically lower our fair value estimate. For example, a $5 billion settlement spread out across 1.85 billion diluted shares would only be a $3 reduction to our valuation. GM also has cash and availability on credit lines totaling $38.3 billion as of Dec. 31 and its 10-K states that 84% of this liquidity is in North America and at regional treasury centers.
According to Whitson, GM is a company on the rise, and one that has finally shed the labor costs that bogged it down for years. Even a total cost of $5 billion would only reduce the company's stock price by a few dollars. And given the outrage that this incident has fomented amongst the public, GM would probably be wise not be cheap when it comes to dealing with the victims of its negligence. The automaker might not be legally liable for its actions before 2009, but the public expects justice. And justice doesn't just mean paying money to the family members of the dead, but GM itself facing some sort of consequence beyond its stock price falling a few points. Five billion dollars might sound like a lot of money, but it's likely that GM can afford it.
Correction: An earlier version misstated that of all the bailouts the U.S. government conducted during the 2008 financial crisis, GM is the only one in which it didn't recoup its principal investment.
Exxon landed a big deal with Vladimir Putin. Should shareholders be concerned?
FORTUNE -- Are we a nation of people willing to climb into bed with any strongman just to make a buck? First we learn that a swath of software companies helped Libya's Moammar Gadhafi chase down Libyan people who disagreed with him. Then we find out that Oracle (ORCL) is being investigated for possibly violating the Foreign Corrupt Practices MOREDuff McDonald, Contributing Editor - Aug 31, 2011 2:12 PM ET
How the break-up of ConocoPhillips could lead to similar moves by oil conglomerates like BP and Exxon Mobil, forever changing the energy landscape.
By Cyrus Sanati, contributor
FORTUNE -- The announcement last month that ConocoPhillips plans to break up into two separately traded companies took Wall Street by surprise, raising uncomfortable questions as to Big Oil's raison d'etre. If COP proves that it can indeed unlock value from separating its exploration and MOREAug 1, 2011 10:18 AM ET
The oil driller committed the corporate public relations blunder of the year, then followed up with an empty apology. What will it do for an encore?
Making full use of its April 1 filing date, Transocean's (RIG) proxy statement deemed 2010 the "best year in safety performance in our company's history," by certain statistical measures. In a small oversight, those stats ignored the 11 deaths caused last April when the company's MOREColin Barr - Apr 4, 2011 1:48 PM ET
Goldman Sachs: It has this "risk" thing all figured out, according to J.P. Morgan.
The Macondo spill: 12 countries and international bodies, plus Iran, offered to help the U.S. clean it up. The U.S. accepted 12 of those offers, minus Iran.
LeBron James: No one can shut up about his potential move to New York, and the NBA is paying good money to make sure it stays that way.
IBM love liaison and MOREJul 6, 2010 4:16 PM ET
Investors are paying attention to BP's corporate finance decisions, which suggest that the company believes its shares are going to keep going up.
by Heidi N. Moore, contributor
Religion usually has no place in the financial markets -- except for those who are doing God's work, of course -- but the faith that BP shareholders have in their holdings can only be explained by belief in a higher power.
No matter MOREJul 6, 2010 2:17 PM ET
Sketchy credit? Questionable future? Step this way to the debt markets. Capitalism's villains are still selling, but for how long?
By Heidi N. Moore, contributor
The public outrage attached to much of the financial crisis has centered on the problem of "privatized gains and socialized losses," or the idea that corporations and countries can act irresponsibly to make money, then have taxpayers to bail them out. That was an MOREJul 1, 2010 3:23 PM ET
Shareholders liked BP's decisions Wednesday. But a bigger question is how the rating agencies will take the news.
Mollifying President Obama and restive shareholders isn't the only task for the oil giant's chairman, Carl-Henric Svanberg (right, with Obama).
Now he and his minions must court the rating agencies. Both Moody's and Standard & Poor's downgraded BP (BP) earlier this month, saying massive legal and cleanup costs from April's gulf coast oil spill would weigh MOREColin Barr - Jun 16, 2010 4:21 PM ET
BP isn't alone. Transocean's dividend has to go too.
BP (BP), under pressure from the White House and Congress, is now weighing a dividend cut. "We are considering all options on the dividend," CEO Tony Hayward told the Wall Street Journal Thursday. "But no decision has been made."
The comments come as public outrage builds against the company's handling of its Gulf Coast oil spill. Just a week ago, BP was saying MOREColin Barr - Jun 11, 2010 8:05 AM ET
Hang on for your lives, BP shareholders!
Shares of the embattled London-based oil company bounced back Thursday, as BP said it doesn't know why its stock went into free fall a day earlier and Wall Street analysts agreed as they often do that now is not the time to panic.
Among the BP (BP) boosters was Bank of America Merrill Lynch analyst Alejandro Demichelis, who rates the stock buy with a $49 price MOREColin Barr - Jun 10, 2010 10:31 AM ET
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