On the heels of one of the largest recalls in Automotive history, the Toyota Motor Corporation has agreed to pay $1.3 billion as a settlement to the US justice dept and admit wrongdoing in a 4-year old case. The case that involved the issue of unwanted acceleration in many of the best-selling Camry models dates back to 2009, and the company has admitted that US consumers were misled about the safety issues, and that statements were deceptive.
Under the prosecution agreement,the State department has imposed what is known as a financial penalty, and the settlement also includes the provision for independent monitoring of the company’s policies and practices. The penalty is the largest ever imposed on any automotive company in the US, and the AG Eric Holder, said basically that the company lied to Congress and consumers, instead of disclosing and addressing the safety issues. He adds further the hope that the resolution will serve as a template for handling similar situations.
No individuals at Toyota were charged in what is seen as the first federal criminal case in the history of the US auto industry, and it also the first federal case since auto safety laws were enacted almost 5 decades ago.
Despite having built a track record of reliability, the company has faced a series of safety issues since 2007. Some issues have been linked to fatalities, while the company still faces scores of class action and private lawsuits. There has been some damage done to the Toyota’s reputation, as the company has issued a massive number of recalls of more than 10 millions vehicles since 2009. The problems cover a wide range of issues , that include automatically activated gas pedals, floor mats, and faulty brakes. Toyota, has also paid more than $66 million in fines for untimely reporting of safety related problems.
Despite the troubles,the Japanese company still maintains the status as the world’s top automaker. In 2013 Toyota was required to pay hefty settlement of $1billion to settle claims that its customers experienced financial that resulted from the recalls of their vehicles. The hefty fines and settlements are expected to have very little effect on the company’s finances as a profit of $5.3 billion was posted in the last quarter.
Officials for Toyota have said that by agreeing to take the $1.3 billion charge to settle the safety issues, it is hoped that the settlement would put the unfortunate chapter in the company’s history, as they move forward with continuous improvement initiatives to become much more customer-focused.
The criminal charges against Toyota were dropped, as the company agreed to the terms of the settlements. Officials hope that the resolution will serve as a precedent for other cases such as the one involving General Motors, which is currently being investigated for the manner in which the recall of more than 1.6 million vehicles were recalled for faulty ignition switches. While GM CEO, Mary Barra, issued a quick apology, Toyota, it appears was involved in deception.
General Motors customers have related cases of spontaneous engine cutoff, and disabled airbags, while Toyota drivers have reported cases of involuntary acceleration with disabled and non-functioning brakes. The investigations have been on-going for more than 4 years. The safety laws have been amended to include criminal prosecution, after an initial reports of unwanted acceleration appeared to be responsible for the death of a family traveling in San Diego in a Lexus ES350 model. At the time Toyota issued a recall of millions of vehicles, but did not disclose the nature of the problems, and canceled plans to change the design or address the issue.
The US Attorney’s office in New York says that as a result of the creative use of lawful mechanisms, more companies can be held accountable, and observers hope that with Toyota’s agreement to pay $1.3 billion to settle safety issues, a better model is developed to handle similar situations.
Written By Dale Davidson