Toyota Reaches $1 Billion Deal in Runaway Cars Case
Thursday, December 27, 2012 - 10:58 AM
(Paul Eisenstein - The Detroit Bureau) Toyota Motor Co. has reached a more than $1 billion settlement intended to put an end to hundreds of lawsuits stemming from the maker’s problems with unintended acceleration. But Toyota still faces a separate series of lawsuits from those who claim to have been injured by runaway vehicles.
The proposed settlement specifically covers lawsuits filed by owners who alleged that the value of their cars, trucks and crossovers had plummeted substantially as a result of the crisis triggered by a series of revelations and recalls that eventually involved more than 14 million Toyota products worldwide.
The maker said it also will launch an extended warranty program covering 16 million current owners while also installing additional safety technology on 3.2 million of its vehicles. But in light of other recent recalls that have involved millions more Toyota products it remains unclear if the settlement will be enough to repair the Japanese giant’s once shining image.
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“This agreement marks a significant step forward for our company, one that will enable us to put more of our energy, time and resources into Toyota’s central focus: making the best vehicles we can for our customers and doing everything we can to meet their needs,” said Christopher P. Reynolds, Group Vice President and General Counsel, Toyota Motor Sales, U.S.A, and Chief Legal Officer, Toyota Motor North America.
The deal must still receive the approval of U.S. District Judge James Selna, who has been overseeing hundreds of lawsuits that have been filed since late 2009 when the maker launched the first in a series of recalls related to unintended acceleration.
The first action involved loose carpets that could jam accelerator pedals making it difficult to slow a vehicle. A subsequent recall announced in early 2010 involved sticky accelerator assemblies. Toyota has since announced several other recalls related to unintended acceleration.
A pair of studies conducted for the National Highway Traffic Safety Administration dismissed allegations that Toyota vehicles also suffered from defective engine control systems that could lead to unintended acceleration. But the agency has nonetheless fined the Japanese maker repeatedly for failing to act upon a known safety defect in reasonable time, as required by law.
Earlier this month, Toyota agreed to pay a $17.35 million fine for delaying a recall involving loose floor carpets in its Lexus RX crossovers. It paid $48.8 million in fines in 2010 for similar delays.
The maker has faced a variety of different lawsuits which were consolidated under the auspices of the U.S. District Court in Santa Ana, California. The proposed settlement only involves those suits alleging that owners saw the value of their vehicles decline as a result of the unintended acceleration scare.
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A total of $250 million will be offered to those who sold or turned in a leased vehicle between September 2009 and December 2010, at the height of the scandal.
Another $250 million will be used to extend the warranty coverage on select vehicle components for owners and lessors of 16 million Toyota products and to retrofit 3.2 million vehicles with a brake override system. That technology is intended to automatically reduce engine power when the brakes are touched, even if a driver inadvertently also applies the throttle.
The remaining funds will be used for safety research and driver education programs.
“We think (this) was a good settlement given the risks of this litigation,” Steve Berman, a lawyer representing Toyota owners, told the Associated Press.
It is not clear how much of the settlement, which Berman estimated at $1.2 billion to $1.4 billion, will go to plaintiffs attorneys. Toyota, meanwhile, said it would take a one-time charge against earnings of $1.1 billion.
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As for those who claim to have been injured in unintended acceleration crashes – and those who are suing on behalf of deceased family members – that case is currently scheduled to see the first trial begin in February, barring any additional settlement.
Toyota appears to be hoping that it can defend itself by referring to findings of the two NHTSA studies, one conducted by the National Academy of Sciences, the other by NASA. Neither could find any proof that Toyota vehicles suffered from electronic gremlins – though the NASA study did leave open the possibility that such issues did exist but were difficult to trace.
During an emotional February 2010 hearing before Congress, Toyota President Akio Toyoda promised to step up efforts to ensure the safety of the company’s vehicles – and to increase the response time when problems are discovered.
The maker has pointed to its strong performance in recent quality and reliability surveys. But skeptics also note not only the latest fine for recall delays but the fact that Toyota has recalled millions more vehicles this year. That includes the maker’s largest recall ever due to faulty window switches that could catch fire.
But industry analysts say that the maker’s problems appear to have had relatively little impact on its sales.