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Toyota offers more than $1 billion to settle suit

Costly: Toyota says its electronic throttle controls are blameless in alleged crashes in the US, but it is forking out more than $1 billion to settle a class action anyway.

Unintended acceleration case comes to head with record settlement by Toyota in US

Toyota logo27 Dec 2012

TOYOTA chose Boxing Day to announce one of the biggest law suit settlements in United States automotive history, saying it would offer cash payments to Toyota vehicle drivers involved in unintended acceleration claims or retrofit brake override systems to their vehicles.

Although no dollar figure was placed on the settlement offer by Toyota Motor North America to the owners of an estimated 16 million Toyota and Lexus vehicles, the company said it would have to take a $1.1 billion pre-tax charge against earnings to cover the estimated costs of the economic loss settlement and possible resolution costs of civil litigation.

Media speculation in the US suggests the overall cost could blow out to more than $3 billion as Toyota implements the plan that also includes funding for an education scheme and further safety research.

The Wall Street Journal quotes a Toyota spokesman as saying cash payments would be capped at $250 million to Toyota owners who sold or turned in their vehicles between September 1, 2009, and December 31, 2010, for lost value $250 million in payments for car owners whose vehicles cannot be updated with brake-override systems between $200 million and $400 million to install brake-override systems on up to 3.25 million vehicles $400 million for extending warranties and about $200 million in attorneys' fees.

The case dates back to 2009-10 when US authorities began investigations into claims of unintended acceleration, spurred by a particular fatal car crash in which an off-duty Californian highway patrol in a borrowed Lexus ES300 ran out of control and crashed, killing himself and three passengers.

Toyota blamed floor mats fouling pedals or sticky throttle pedals for the crashes, recalling millions of cars for remedial work, but several class-action law suits were brought by customers blaming electronic throttle controls.

US authorities later cleared the electronic throttles of causing the problem, but the suits remained.

Announcing the agreement to resolve the litigation, Toyota Motor Sales America group vice president and general counsel Christopher Reynolds said Toyota was committing to actions that deliver value to its customers.

“This agreement marks a significant step forward for our company, one that will enable us to put more of our energy, time and resources into Toyota’s central focus: making the best vehicles we can for our customers and doing everything we can to meet their needs,” he said.

“In keeping with our core principles, we have structured this agreement in ways that work to put our customers first and demonstrate that they can count on Toyota to stand behind our vehicles.

“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.

“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 agreement still has to be approved by a US District Court judge in California.

Toyota says the cash payments will be made to eligible customers who sold or turned in their lease vehicles in 2009-10, or to current owners whose vehicles can’t be fitted with the brake override system.

The latter is expected to include hybrid cars that can’t accept such retrofit technology.

Toyota is facing two other legal actions relating to the unintended acceleration issue in the US, for which it recalled more than 5.3 million vehicles for ill-fitting floor mats and 2.77 million vehicles for sticking throttle pedals.

Just two weeks ago, the National Highway Traffic Safety Administration (NHTSA) fined Toyota the maximum $17.35 million for tardy reporting of floor-mat safety problems with its Lexus RX350.

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