Toyota Proposes $1.4 Billion Unintended Acceleration Settlement
Remember the Toyota unintended acceleration crisis of 2009-2010? I’m sure Toyota hasn’t forgotten it. Nearly every model in the company’s lineup was recalled to replace floor mats that could have trapped the vehicles’ accelerator pedals, making it difficult to slow or stop the vehicles (unless owners turned off the cars or shifted them to neutral). Toyota has now proposed firmly putting the matter in its rearview mirror with a comprehensive settlement proposal that is slated to be reviewed by U.S. District Judge James Selna, who is presiding over the current class-action case on the matter.
The proposed terms of the settlement are:
- Toyota will install brake-override systems in 3.25 million vehicles subjected to floor mat entrapment recalls
- A $250 million settlement with former Toyota owners who sold their vehicles between September 1, 2009 and December 31, 2010 to compensate them for loss of resale value
- $250 million will compensate current owners who are not eligible for the brake override system
- All affected Toyota vehicles (16 million) will receive an extended warranty to cover systems that could have an impact on unintended acceleration, though to date nothing has been proven. (Systems covered include engine-control modules, cruise-control switches, accelerator pedal assemblies, stop-lamp switches and throttle body assemblies; Toyota contends to this day that there are no problems with any of those parts.)
- Education grants for the study of vehicle safety valued at $30 million
- $200 million in attorney’s fees and court costs
The actual settlement amount will likely range between $1.1 billion and $1.4 billion, but naturally, the lead plaintiff’s attorney is crowing about the high end of it (costs of installing the brake-override systems and potentially replacing other components down the road are the biggest variables between the two figures).
According to the terms of the proposed settlement, Toyota did not concede any blame for the problems, but just wants to put the matter behind it. Toyota’s market share has basically recovered since the depths of the crisis and consumer attitudes toward the Toyota brand have really never been better.
It’s important to note that this settlement deals with more the potential unintended acceleration problems that Toyota vehicles may or may not have experienced, but doesn’t touch those cases in litigation where there were actual crashes and injuries. Toyota is still in court hashing those out with owners or families, as the case may be.
Investors in Toyota’s stock were cheered by the news of the potential settlement. Investors hate uncertainty, so even a $1.1-1.4 billion charge is a lot of money, it’s smaller than it could have been, and largely puts the matter behind the company.
Further proving that the recall crisis (and Thai flooding last year) are behind it, Toyota predicted that its global sales will increase about 2 percent in 2013 to 9.91 million units (including Daihatsu and Hino). If Toyota’s prediction is accurate, it would mean that Toyota will again be the world’s largest automaker. It would be supplanting GM, which last year reclaimed the title it had held for about seven decades, and would likely stave off a surging Volkswagen, which is nipping at both companies’ heels and may well be the world’s largest automaker in the next year or two.
If you’re the owner or former owner of a recalled Toyota, you can go to a website that Toyota set up specifically for updates on any settlement at http://www.toyotaelsettlement.com/. (Warning: right now, it’s about the least-interesting website you’ll ever see.)