Toyota reaches $1.2B unintended acceleration settlement in criminal probeWed, 19 Mar 2014
UPDATE: Just like that, Toyota has released an official statement confirming its $1.2-billion dollar settlement with the US Attorney's Office. Our story has been updated to reflect this development and the automaker's official statement has been added below.
Toyota has reached a settlement over the criminal probe into its unintended acceleration problems, and the outcome is more expensive than first expected. The Japanese automaker has agreed to pay $1.2 billion to close the investigation among other settlement terms. The criminal inquiry focused on whether the company kept information from regulators and how it handled drivers' complaints about the problems, according to the sources.
Between 2009 and 2010, Toyota ended up recalling over 10 million vehicles worldwide over sudden acceleration fears. Fixes include modifying floor mats, gas pedals, and installing brake override software on affected models. In addition, Toyota made the latter standard on all of its new vehicles.
The first rumblings of a settlement broke last month when "people familiar with the matter" revealed a possible billion-dollar agreement. That rumor suggested that the deal would also include criminal deferred prosecution arrangement that would force Toyota to accept responsibility but let it avoid federal criminal convictions. This latest story doesn't mention this factor in the settlement.
"Toyota has cooperated with the US Attorney's office in this matter for more than four years. During that time, we have made fundamental changes to become a more responsive and customer-focused organization, and we are committed to continued improvements," said company spokesperson Steve Curtis in a statement to Bloomberg.
Toyota has already settled several other lawsuits related to the issue, including a $1.6-billion lawsuit from vehicle owners who claimed their cars dropped in value because of the issue. A $29-million settlement dealt with complaints from Attorneys General of 29 states.
Toyota Enters Agreement with U.S. Attorney's Office Related to 2009-2010 Recalls
NEW YORK, NY, March 19, 2014 – Today, Toyota announced that it reached an agreement with the U.S. Attorney's Office for the Southern District of New York to resolve its investigation initiated in February 2010 into the communications and decision-making processes related to the company's 2009-2010 recalls to address potential "sticking" accelerator pedals and floor mat entrapment. As part of the agreement, Toyota will make a payment totaling $1.2 billion.
"At the time of these recalls, we took full responsibility for any concerns our actions may have caused customers, and we rededicated ourselves to earning their trust," said Christopher P. Reynolds, chief legal officer, Toyota Motor North America. "In the more than four years since these recalls, we have gone back to basics at Toyota to put our customers first."
Reynolds continued: "We have made fundamental changes across our global operations to become a more responsive company – listening better to our customers' needs and proactively taking action to serve them.
"Specifically, we have taken a number of steps that have enabled us to enhance quality control, respond more quickly to customer concerns, strengthen regional autonomy and speed decision-making. And, we're committed to continued improvement in everything we do to keep building trust in our company, our people and our products. Importantly, Toyota addressed the sticky pedal and floor mat entrapment issues with effective and durable solutions, and we stand behind the safety and quality of our vehicles.
"Entering this agreement, while difficult, is a major step toward putting this unfortunate chapter behind us. 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," Reynolds concluded.
Among the substantive actions the company has voluntarily taken since the recalls are:
Launching rapid-response teams to investigate customer concerns quickly
Committing $50 million in 2011 to launch Toyota's Collaborative Safety Research Center in Ann Arbor, Michigan to partner with more than 16 universities and institutions across North America on safety advances that will be shared to benefit the entire auto industry and society;
Expanding its network of field quality offices to improve customer responsiveness;
Enhancing regional autonomy, including naming the first American CEO of Toyota's North American Region as well as Chief Quality Officers for North America and other principal regions – all of whom have direct lines to President Akio Toyoda;
Improving its quality control process; and
Extending the new vehicle development cycle by four weeks to help ensure reliability and safety.
Under the agreement, the Government agrees to defer prosecution and then dismiss its case, as long as Toyota makes the required monetary payment, abides by the terms of the agreement and continues to cooperate with the Government. The agreement also provides for an independent monitor to review policies and procedures relating to Toyota's safety communications process, its process for internally sharing vehicle accident information and its process for preparing and sharing certain technical reports.
Toyota will record $1.2 billion in after-tax charges against earnings in the fiscal year ending March 31, 2014 for costs relating to the above agreement.
Toyota (NYSE:TM), the world's top automaker and creator of the Prius, is committed to building vehicles for the way people live through our Toyota, Lexus and Scion brands. Over the past 50 years, we've built more than 25 million cars and trucks in North America, where we operate 14 manufacturing plants (10 in the U.S.) and directly employ more than 40,000 people (more than 32,000 in the U.S.). Our 1,800 North American dealerships (1,500 in the U.S.) sold more than 2.5 million cars and trucks (more than 2.2 million in the U.S.) in 2013 – and about 80 percent of all Toyota vehicles sold over the past 20 years are still on the road today.
Toyota partners with philanthropic organizations across the country, with a focus on education, safety and the environment. As part of this commitment, we share the company's extensive know-how garnered from building great cars and trucks to help community organizations and other nonprofits expand their ability to do good. For more information about Toyota, visit www.toyotanewsroom.com.
By Chris Bruce
See also: Toyota tops Consumer Reports best, worst used car values, Mazda3 sales off to rocky start despite massive critical acclaim, VW targeting 10M sales in 2014.