Popular Japanese automaker Toyota Motor Corporation has been ordered to pay a $1.2 billion fine by the United States for misleading its American consumers over safety issues. Imposed on Wednesday, the fine comes after a four-year long investigation into apparent lapses in Toyota’s report of safety issues to the regulators as well as the public.
The incident that brought to light safety issues in Toyota cars was an accident in which a California highway patroller and his family members died. The accident was reportedly caused by unintended acceleration of his Toyota Lexus. Following this, the automotive manufacturer was mired in hundreds of lawsuits, which cost the company billions of dollars over similar acceleration issues and injuries.
In reaction, the company was forced to recall around 9.4 million vehicles beginning in 2009 for faulty accelerator pedals that were “sticky” and floor mats that could lead to such pedals getting stuck. The widespread recalls led to the U.S. Department of Justice launching a criminal investigation.
Initially, Toyota refuted any knowledge of the said defect, both publicly and during its interactions with federal regulators. However, the investigation revealed that the automaker had intentionally covered up information about the incidents and misled public opinion over safety of its vehicles. An inquiry by the Federal Bureau of Investigation found that company records showed Toyota was not only aware of the safety problem and that it was getting bigger, according to sources speaking to the New York Times.
While its unusual for automotive manufacturers to be held criminally accountable for malfunctions and for such accusations to precipitate a substantial fine, the case has wrapped up with Toyota fully accepting its misconduct, besides agreeing to pay the billion dollar fine. Toyota, which misled American consumers, has been instructed to pay its $1.2 fine through its after-tax income.
The United States Attorney General, Eric H. Holder Jr. told reporters at a press conference that the financial penalty was fitting as Toyota displayed a shameful disregard for the safety of its consumers. Also present was Preet Bharara, the United States attorney in Manhattan, who led the Toyota investigation and Anthony R. Foxx, the transportation secretary.
The Toyota case is likely to become a stencil for authorities investigating other automotive companies. A case in point is General Motors, which had to suddenly shut down because of a defect in its cars. Though only ambiguous warnings like, the whole auto industry should take note and not echo Toyota’s mistakes were made at the conference, Mr. Bharara slipped-up at one point and said “General Motors” instead of “Toyota.” This created an awkward situation because it was evident that the officials wanted to avoid making statements on whether an investigation on General Motors was actually underway.
Reacting to their biggest ever criminal penalty, Toyota North America’s Chief Legal Officer, Christopher P. Reynolds said that the automaker, at the time of the recalls, had taken full responsibility for any issues their actions might have caused their customers. He added that since then the automaker had “rededicated” itself towards going back to its basics and winning the public’s trust once again. Accepting the terms of this settlement, he said, would be a difficult but essential measure towards closing this “unfortunate chapter”.
The settlement, which has placed a $1.2 billion fine on Toyota for misleading American consumers, also ensures that the car manufacturer will submit to rigorous independent review. The independent monitor will inspect Toyota’s regulatory reporting and public statements regarding safety issues.
By Aruna Iyer