Toyota settles unintended acceleration case for $1.1 billion

January 22, 2013 by

Fotolia CarToyota Motor Corp has agreed to spend $1.1 billion to settle sweeping U.S. classaction litigation over claims that millions of its vehicles accelerate unintentionally, as the Japanese automaker seeks to move past the biggest safety crisis in its history.  Shares of Toyota rose nearly 3 percent in Tokyo following the news, with some investors saying the settlement removed one uncertainty for the company and looked manageable given its improving sales outlook and a weaker yen.

The proposed settlement will compensate customers for economic losses related to possible safety defects in Toyota vehicles, covering most of the litigation involving unintended acceleration, although it does not cover claims for wrongful death or injuries. About 16 million Toyota, Lexus and Scion vehicles sold in the United States spanning the model years 1998 to 2010 are covered by the action, according to court filings made public on Wednesday. Thirty nameplates are affected, including the top-selling Toyota Camry midsize sedan and Corolla compact car.

Toyota, the No. 3 automaker in the U.S. market, admitted no fault in proposing the settlement, one of the largest of U.S. mass class action litigation in the automotive sector. “This was a difficult decision, especially since reliable scientific evidence and multiple independent evaluations have confirmed the safety of Toyota’s electronic throttle control systems,” Christopher Reynolds, general counsel for Toyota Motor Sales, USA, said in a statement.

“However, we concluded that turning the page on this legacy legal issue through the positive steps we are taking is in the best interests of the company, our employees, our dealers and, most of all, our customers.”

The figure eclipses other settlements in the auto industry including Bridgestone Corp’s $240 million payout to Ford Motor Co in 2005 over Ford’s massive Firestone tire safety recall in 2001. Ford replaced 13 million Firestone tires, installed mostly as original equipment on the company’s popular Explorer SUV, in one of the biggest recalls in U.S. history.

Toyota said it would take a one-time pretax charge of $1.1 billion to cover the costs. The company said it planned to book the charge as operating expenses in its October-December third quarter. 

Toyota shares rose 2.7 percent, compared with a 1 percent rise in Japan’s benchmark Nikkei index.

The biggest safety crisis in Toyota’s history began to get public notice in August 2009 when an off-duty California Highway Patrol officer Mark Saylor and three members of his family were killed in a Lexus ES 350 that crashed at a high speed.  A separate lawsuit over the death of the Saylor family was settled out of court. A handful of wrongful death and personal injury cases are still pending, but the vast majority of the litigation over unintended acceleration will be finished if the proposed settlement is approved.

Within a half year of the Saylor family crash, Toyota President Akio Toyoda and other company executives were questioned in a high-profile U.S. Congressional hearing, and Toyoda made a public apology.

Toyota maintained all along that its electronic throttle control system was not at fault, and reiterated that on Wednesday. It has blamed ill-fitting floor mats and sticky gas pedals for the problem.

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Steve Larson
An experienced trial lawyer who handles both hourly and contingent fee cases, Steve has expertise in class actions, consumer cases, antitrust litigation, securities litigation, corporate disputes, intellectual property disputes, unfair competition claims, employment matters, and disputes involving family wealth. Steve regularly represents individuals and businesses in federal and state court and has obtained class-wide recovery in multiple class actions. A veteran practitioner, Steve's clients value his creative approach to resolving complex litigation matters.

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