An expensive, damaging settlement for Japan’s largest automaker and the Japanese and offshore brand sales leader in the U.S.
Late yesterday Toyota Motor North America said it would settle lawsuits by paying cash to customers who sold or turned-in their leased vehicles during 2009-2010 at the height of the unintended acceleration fiasco. This is to make up for the alleged lost trade-in value that occurred from all of the negative publicity. The Japanese automaker, with the dubious distinction of paying the largest fines in U.S. history for its multiple cover-ups of unintended acceleration and other safety defects, will also modify the engine controls of Toyota Lexus and Scion models covered by the floor mat recall with a brake override system. About 16 million Toyota, Lexus and Scion vehicles are involved.
In an engineering lapse of monumental consequences that included dozens upon dozens of alleged deaths, the computer programming on affected Toyota, Lexus and Scion vehicles when confronted with both brake and accelerator sensor inputs did not favor the brake input for its electronic engine controls. Such over-ride software is in widespread use at other automakers. If it is not, it likely will be implemented on electronic throttle control systems because of this expensive and reputation damaging settlement.
Toyota said it would take a one-time, $1.1 billion pre-tax charge against earnings to cover the estimated costs of the economic loss settlement and possible resolution costs of civil litigation brought in California by the District Attorney of Orange County and an investigation by a multi-state group of Attorneys General stemming from its previous delayed recalls. Toyota will pay all plaintiffs’ attorneys of the class action $200 million in fees, plus up to an additional $27 million in expenses. These fees and expenses will go to 25 plaintiffs’ firms and about 85 attorneys who worked on the lucrative litigation.
The lawsuit alleged that Toyota designed, manufactured, distributed, advertised and sold automobiles containing a defect that allowed sudden unintended acceleration of the vehicle to occur and that economic losses to customers resulted.
The plea deal absolves Toyota of any admission or concession by Toyota of any liability or wrongdoing. However it does not absolve Toyota of guilt in several hundred wrongful death and injury lawsuits that are pending as separate matters.
Toyota will also establish an extended warranty program for the Engine Control Module, Cruise Control Switch, Accelerator Pedal Assembly, Stop Lamp Switch and the Throttle Body Assembly. The warranty will continue for 10 years from the expiration of the existing warranty for those parts, with a maximum limit of 150,000 miles from the vehicle’s in-service date, which is the first date the vehicle is either delivered to an ultimate purchaser, leased or used as a demo.
The settlement is subject to almost certain approval by the U.S. District Court for the Central District of California where what is known as the multi-district litigation is pending. However, in the contentious world of U.S. product liability litigation, appeals are still possible, and the plaintiffs of the 221 individual cases that comprise the class could opt out.
The original Toyota unintended acceleration and stuck gas pedal recalls on millions of Lexus and Toyota vehicles were only undertaken by Toyota after years of neglect and stonewalling when U.S. Department of Transportation officials flew to Japan and insisted on the safety recalls. Japaneses executives were oblivious or ignoring to the complaints.
Toyota’s U.S. executives were only responsible for sales matters and were powerless to address the issue. Subsequently, DOT imposed record fines on Toyota for delays in addressing the deadly problems. Congressional hearings about Toyota’s conduct were deeply embarrassing for the Japanese company, as well as DOT’s safety branch, the National Highway Traffic Safety Administration.
DOT has a huge $79 billion annual budget, but little of the money is allocated to auto safety. Motor vehicles are responsible for 95% of the nation’s transportation deaths but only 1% of the Transportation budget. Worse, the enforcement arm of NHTSA has a budget of less than $20 million.
Between July 2003 and April 2009, NHTSA opened eight separate investigations of Toyota and Lexus models for possible unintended acceleration defects. Seventeen of those investigations were caused by consumers or patterns of consumer complaints. In most of those investigations, NHTSA never determined a cause and closed them without recommending any recalls. Worse, in revolving door Washington, former Toyota employees were part of the NHTSA investigation process that lead nowhere.
NHTSA still appears particularly weak in the area of electronic controls and systems – almost half of the value of new vehicles by some estimates – as automakers continue to rapidly expand their use in all vehicles. And the widely publicized Motor Vehicle Safety Act of 2010, the result of the egregious problems on view during the Toyota Congressional hearings in 2009, died when a Republican blocked its consideration during the waning days of the 111th Congress in December of 2010.
During 2012 Toyota recalled 5.3 million vehicles in the U.S. – almost one-third of the total number of vehicles recalled and the worst record of any automaker. Honda was second at 3.4 million.
Read AutoInformed on:
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- NHTSA Prompted Latest Lexus Recall after Web Complaints
- Toyota Adds 150,000 Lexus Models to Deadly Floor Mat Recall. NHTSA Says Filing Lacks Required Info. Another Cover-up?
- BMW Follows Toyota by Paying $3 Million Fine for not Reporting Known Safety Defects within Five Days to NHTSA
- NRC Agrees Toyota Unintended Acceleration Mechanical – but NHTSA Didn’t Address Auto Electronics Safety Concerns
- Toyota Outlines Legal Woes in SEC Filing and Says Amounts Accrued for Defense, Thus Far, Will Not Have a Material Effect
- Toyota Recall Study Finds Adversarial Relationship with NHTS
- Toyota Wins New York Unintended Acceleration Case
- Toyota Starts a Sweeping Reorganization – “Global Vision”
- DOT Releases Long Delayed Toyota Unintended Acceleration Report, Exonerates Self, Claiming It Was Right All Along
- Toyota Opens Two New Product Quality Field Offices in U.S.
- Toyota Motor Fined Another $32.425 Million for Safety Defects
