Toyota to pay $1.2B over defect cover-up

WASHINGTON, United States – Toyota Motor Corporation will pay US$1.2 billion to settle US criminal charges that it lied to safety regulators and the public as it tried to cover-up deadly accelerator defects.

The Japanese auto giant eventually recalled 12 million vehicles worldwide in 2009 and 2010 at a cost of $2.4 billion as the scandal over sudden, unintended acceleration spread and tarnished its once-stellar reputation.

Dozens of deaths were blamed on the defects which caused vehicles to speed out of control and fail to respond to the brake.

“Toyota’s conduct is shameful,” Attorney General Eric Holder said in announcing the settlement Wednesday.

“Rather than promptly disclosing and correcting safety issues about which they were aware, Toyota made misleading public statements to consumers and gave inaccurate facts to members of Congress,” Holder said.

“In other words, Toyota confronted a public safety emergency as if it were a simple public relations problem.”

In reaching the settlement, Toyota admitted that it lied when it insisted in 2009 that it had addressed the “root cause” of the problem by fixing floor mats that could trap the accelerator.

As part of the cover-up, Toyota scrapped plans to fix the “sticky pedal” defect in the United States and instructed employees and its parts supplier not to put anything about the design changes in writing.

Lying to public, regulators

Toyota eventually revealed the sticky pedal problems and recalled millions of affected vehicles.

But it continued to try to cover its tracks by lying to the public, safety regulators and even a US congressional hearing about when the problem was discovered, the settlement agreement said.

Perhaps most disturbing for the families of those who died is the fact that Toyota knew about the floor mat problems as early as 2007 but did not think it was serious enough to fix until affected models received a “full redesign” – something that happens only every three to five years.

Internal documents showed that Toyota employees celebrated saving more than $100 million in “unnecessary costs” by convincing safety regulators investigating defect reports in 2007 that only the mats had to be fixed. It hid from regulators evidence that the pedals were also problematic because they sank too close to the floor.

Toyota said it has made “fundamental changes” to improve its handling of safety issues and consumer complaints and is “committed to continued improvement in everything we do to keep building trust in our company, our people and our products.”

“Entering this agreement, while difficult, is a major step toward putting this unfortunate chapter behind us,” Christopher Reynolds, chief legal officer for Toyota Motor North America, said in a statement.

“We remain extremely grateful to our customers who have continued to stand by Toyota. Moving forward, they can be confident that we continue to take our responsibilities to them seriously.”

‘Lasting damage of deception’

Holder warned other car companies to “not repeat Toyota’s mistake.”

“A recall may damage a company’s reputation, but deceiving your customers makes that damage far more lasting,” he said.

The Toyota settlement came as General Motors is under fire for taking more than 10 years to address an ignition problem linked to more than 30 crashes and 12 deaths.

Holder would not confirm or deny reports that the Justice Department is investigating GM’s conduct.

However, he said the Toyota settlement is “reflective of the aggressive nature we would take” should an automaker try to deceive the public, “and the way we would resolve it.”

The $1.2 billion fine is the largest financial penalty that the US Justice Department has imposed on an automaker.

Toyota continues to work through dozens of civil lawsuits from people hurt and the families of those killed in crashes allegedly caused by the defect.

Toyota agreed to pay about $1.1 billion in 2012 to settle a class action lawsuit launched by US owners of vehicles affected by the recalls.

The company did not accept any blame but agreed to compensate owners of about 16.3 million vehicles who said their value had been reduced because of the recalls. – Rappler.com