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Toyota agrees to $1bn US settlement

Japanese car maker agrees to settle legal claims launched by US vehicle owners affected by a series of mass recalls.
Last Modified: 27 Dec 2012 01:29
Toyota has agreed to pay $1.1bn in the settlement of a lawsuit about faulty cars [AFP]

Toyota has agreed to pay more than $1bn to settle a class action lawsuit launched by US vehicle owners affected by a series of mass recalls, the Japanese car maker has said.

Toyota did not accept any blame but on Wednesday agreed to compensate owners who argued that the value of about 16.3 million vehicles took a hit from dozens of deadly accidents allegedly caused by Toyota vehicles speeding out of control in 2009.

The deal will cover the cost of installing a free brake override system in about 2.7 million vehicles.

It will also provide cash payments to those who sold their vehicles in the wake of the recalls or who own vehicles ineligible for the override system.

Record settlement

The deal amounts to "a landmark, if not a record settlement in automobile defect class action litigation in the United States," according to the plaintiff memo.

Toyota described the settlement as a "significant step forward" for the Japanese automaker, which has seen its image take a hit from the controversy.

Once lauded for its safety standards, Toyota was forced into damage control mode in recent years after recalling millions of vehicles over a series of serious defects.

Earlier this year it added two models to the controversial 2009-2010 recalls launched after it was discovered that floor mats were trapping the accelerator pedals.

Toyota's mishandling of the initial problem and other reports of sudden, unintended acceleration led to a US congressional probe, more than $50m in fines from US regulators and public apologies by its chief.

Just two weeks ago, the company agreed to pay a record $17.35m fine for failing to promptly notify US authorities that the floor mats could also be trapped under the accelerators of 2010 Lexus models.

The settlement helps Toyota avoid a lengthy and risky court battle with angry car owners who argued that Toyota's technology - not the trapped floormats - were behind the deadly instances of sudden, unintended acceleration.

'Difficult decision'

"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, Toyota Motor North America's chief legal officer, 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 settlement, which was filed in a California federal court on Wednesday, must still be approved by a judge.

It includes $250 million for owners who've sold their vehicles, $250 million for owners whose vehicles are ineligible for the brake override system and $30m for safety research.

Toyota will also provide free repairs for certain components linked to the recall.

The car maker said it would take a $1.1bn charge to cover the estimated costs of the settlement and two other cases.

A lead attorney for the plaintiffs told the Wall Street Journal that Wednesday's deal could end up costing Toyota as much as $1.4bn.

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