Toyota’s Record $1.2B Settlement

Toyota’s Record $1.2B Settlement

Japanese car maker, Toyota, has reached a $1.2 billion settlement with the United States Government, due to catastrophic design faults. Following an intense four-year investigation, the car brand has been ordered to compensate victims who had purchased affected vehicles.

A criminal investigation was ordered by the Government following numerous cases of unintended acceleration problems among many Toyota models, including the top-selling Camry sedan. Due to aforementioned problems, numerous recalls worldwide were ordered since 2009 to rectify any problems, with a large majority of incidents occurring within the United States.

Totaling over 10 million recalls, alleged causes of the unintended acceleration have been quoted by officials to include: faulty gas pedals, woefully designed floor mats, and faulty brakes. However a recent jury in Oklahoma awarded $3 million compensation to the badly injured driver, and the family of the passenger who was killed in the crash, due to a faulty electronic throttle-control system in their 2005 Toyota Camry.

Best Selling Toyota

Best Selling Sedan in United States

Prior to the Oklahoma ruling, Toyota successfully claimed that bursts of random acceleration were caused solely by driver negligence. So convincing was the claim that several court cases were awarded in the favor of the car manufacturer, despite high profile recall campaigns. Indeed the Oklahoma case almost followed suit, until an industry expert discovered flaws in the Camry’s electronics, which ultimately led to the car running through an intersection and colliding with an adjacent embankment. Despite the expert opinion, electronic flaws were never actually confirmed by the National Highway Traffic Safety Administration during their entire investigation.

Worse still was Toyota Motor Corp’s negligence in reporting design faults to consumers, which led to the imposition of fines totaling $66 million between 2010 and 2012. Should a more swift response have occurred following the initial complaints, the potential for less of a financial burden upon the Japanese car maker could have remained significantly lower.

Instead, hundreds of lawsuits have occurred due to the financial losses suffered by those affected by the emergency recalls, costing the motoring giant well over $1 billion. Not to mention the additional costs of the actual recall protocol, costing millions of Dollars, $66 million in fines to the National Highway Traffic Safety Administration, and payouts for wrongful death and injuries in California State and Federal Courts.

Past Examples

Audi faced similar accusations on their Audi 5000 models between 1982 and 1987 in which similar incidents occurred. Besides the obligatory recall, 700 accidents resulted and six fatalities. The resulting controversy diminished Audi’s American sales to pitifully low levels. Figures from 1985 suggested that sales had achieved a sum of 74,061. The records from 1991 however, demonstrated that sales plummeted to a woeful 12,283, without a full recovery until 2000. Lawsuits were also filed for loss of resale value following these events, which would make the Audi 5000 worthless on classified websites like carsales.com.au.

Most recently  General Motors is in hot water with the federal government for their handling of the ignition switch recall. The biggest concern is why it took over 7 years for GM to address the problem. Ignition switch malfunction could cause a loss of power and put occupants in danger, so far 12 deaths have been linked to the malfunction. GM’s PR arm is working hard to deal with the situation on social media and prove that they are willing to stand behind their product.

Market Standing

Toyota’s reputation prior to these events and subsequent lawsuits was one of producing reliable and bullet-proof vehicles. Though the aforementioned PR disasters seriously threatened the firm’s potential sales within the United States, and amongst the global markets.

On the contrary though, Toyota is the biggest selling automotive manufacturer in the world for the second consecutive year, defeating both General Motors and Volkswagen AG. An output of 9.98 million vehicles in 2013, with a rise of 2.4 per cent, certainly proves that Toyota has dodged the bullet with these controversial lawsuits. Admittedly, figures include all subsidiary firms, including: Scion, Lexus, Daihatsu and Hino. Though prior to new management, 2009 was the first year which Toyota actually experienced a loss, with the unintended acceleration problems contributing massively.

About the Author: Alex Marinov

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Alex Marinov is the president of RCG Logistics LLC, with years experience in the shipping and freight industry. His main interest include sustainable building design, video production and automobiles.

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Posted by
Alex Marinov
Post Date
03/26/2014

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