Toyota agreed to pay $16.4 million in failing to report flaws

Toyota agreed to pay $16.4 million in failing to report flaws

 

WASHINGTON (Bloomberg) -- Toyota Motor Corp. agreed to pay a record $16.4 million U.S. fine for failing to report flaws with vehicle accelerator pedals, U.S. Transportation Secretary Ray LaHood said today.

The company, which has recalled more than 8 million vehicles worldwide for defects that may cause unintended acceleration, was fined by the U.S. auto safety regulator for failing to alert the government about circumstances in which gas pedals may stick. LaHood said the U.S. continues to investigate Toyota's compliance with defect disclosure rules.

“Toyota has accepted responsibility for violating its legal obligations to report any defects promptly,” LaHood said in an e-mailed statement. “By failing to report known safety problems as it is required to do under the law, Toyota put consumers at risk.”

The fine, which amounts to less than 2 percent of Toyota's projected net income for the year ended March 31, may bolster the case for plaintiffs seeking compensation from the Japanese carmaker. At least 180 consumer and shareholder lawsuits are seeking class-action status and at least 57 individual suits are claiming injuries or deaths caused by sudden acceleration incidents in Toyota vehicles.

“The fine is coming on top of costs from increased incentives and vehicle testing,” said Tatsuya Mizuno, director of Mizuno Credit Advisory in Tokyo. “At this point, there's no telling what will come of the lawsuits.”

Paul Nolasco, a Toyota spokesman in Tokyo, declined to comment. The carmaker could have contested the fine, which is the maximum amount the National Highway Traffic Safety Administration can levy.

Separate defects

Toyota has 30 days to pay the fine, imposed April 5 by NHTSA. It may be followed by additional penalties because the pedals supplied to Toyota by CTS Corp. “had two separate defects that may require two separate remedies,” the agency told the carmaker in a letter the day it announced the civil penalty.

Toyota shares fell 1.9 percent to close at 3,625 yen on the Tokyo Stock Exchange.

A recall in January of 2.3 million vehicles involved pedals from CTS, based in Elkhart, Ind., that were slow to return after being depressed as well as pedals on various vehicles that could become stuck.

Manufacturers have five days to report safety defects to NHTSA. The regulator said Toyota waited at least four months before notifying authorities about the defects.

The carmaker, based in Toyota City, Japan, failed to share defect information adequately among regional units, company President Akio Toyoda has said. His grandfather founded the company.

The U.S. fine might have been as much as $13.8 billion were it not for a statute limiting NHTSA to a civil fine to $16.4 million, the agency said in its letter. That's based on each of the 2.3 million vehicles involved in the U.S. recall qualifying for a fine of as much as $6,000 each.