US announces $1.2B settlement with Toyota, files criminal charge for ‘misleading statements’ by Eric Tucker and Tom Krisher, March 19, 2014, The Associated Press in Calgary Herald
Toyota agreed to pay $1.2 billion to settle an investigation by the U.S. government, admitting that it hid information about defects that caused Toyota and Lexus vehicles to accelerate unexpectedly and resulted in injuries and deaths. Attorney General Eric Holder said Wednesday that the penalty is the largest of its kind ever imposed on an auto company. The four-year criminal investigation focused on whether Toyota promptly reported the problems related to unintended acceleration.
The company admitted to misleading consumers and regulators by assuring them that it had addressed the problems — which became public in 2009 following a car crash in San Diego that killed a family of four — through a limited safety recall of certain models. Toyota knew at the time that it hadn’t recalled other models susceptible to the same acceleration problem and also took steps to conceal a separate acceleration problem related to a faulty pedal, according to the Justice Department. “In other words, Toyota confronted a public safety emergency as it if were a simple public relations problem,” Attorney General Eric Holder said at a news conference.
Prosecutors filed a criminal charge Wednesday alleging the company defrauded consumers by issuing misleading statements. They said they’ll move to dismiss the charge in three years if Toyota complies with the terms of the settlement. An independent monitor will review policies, practices and procedures at the company. No Toyota executives were charged under the deal. U.S. Attorney Preet Bharara of the Southern District of New York, whose office brought the case, said he expected the agreement to be a “final resolution.”
Starting in 2009, Toyota issued massive recalls, mostly in the U.S., totalling more than 10 million vehicles for various problems including faulty brakes, sticky gas pedals and ill-fitting floor mats. From 2010 through 2012, Toyota paid fines totalling more than $66 million for delays in reporting safety problems. Toyota agreed last year to pay more than $1 billion to owners of its cars who claimed to have suffered economic losses because of the recalls. The company still faces wrongful death and injury lawsuits that have been consolidated in California state and federal courts. In December, Toyota filed court papers after saying that it’s in settlement talks on nearly 400 U.S. lawsuits, but some other cases aren’t included in the talks.
The negotiations began less than two months after an Oklahoma jury awarded $3 million in damages to the injured driver of a 2005 Camry and to the family of a passenger who was killed. The ruling was significant because Toyota had won all previous unintended acceleration cases that went to trial. It was also the first case where attorneys for plaintiffs argued that the car’s electronics — in this case the software connected to a midsize Camry’s electronic throttle-control system — were the cause of the unintended acceleration. At the time, legal experts said the Oklahoma verdict might cause Toyota to consider a broad settlement of the remaining cases. Toyota has blamed drivers, stuck accelerators or floor mats that trapped the gas pedal for the acceleration claims that led to the big recalls of Camrys and other vehicles. The company has repeatedly denied the electronics are flawed. [Like oil and gas and service companies blaming nature for causing toxic frac fluid and dangerous methane contamination in citizen water wells and municipal tap water?]
No recalls have been issued related to problems with onboard electronics. In the Oklahoma case, Toyota attorneys theorized that the driver mistakenly pumped the gas pedal instead of the brake when her Camry ran through an intersection and slammed into an embankment. But after the verdict, jurors told AP they believed the testimony of an expert who said he found flaws in the car’s electronics. While significant, the latest penalty isn’t a severe hit to Toyota’s finances. In its last fiscal quarter alone, Toyota posted a $5.2 billion profit, crediting strong global sales.
The Toyota case could foreshadow what’s in store for General Motors. The same U.S. attorney’s office is investigating the Detroit auto giant for its slow response to a faulty ignition switch problem in older compact cars that has been linked to at least 31 crashes and 12 deaths. NHTSA also is investigating whether GM withheld information about the problem and could fine the automaker $35 million. [Emphasis added]
Canadian law suits filed against GM in wake of defective ignition switches by The Canadian Press, March 20, 2014, Calgary Herald
A Canadian class-action law firm is going after General Motors for the automaker’s handling of defective ignition switches in 1.6 million small cars worldwide, including about 235,000 cars sold in this country. The firm seeks to represent and compensate people across Canada for defects in various models of small cars with the defective switch, used between about 2003 and 2007. Merchant Law Group LLP says it filed claims against the Detroit-based auto maker on Wednesday in Ontario and Quebec courts. GM announced last month that ignition switches in older models of the Chevrolet Cobalt, Pontiac G5s, Saturn Ion, Chevrolet HHR, Pontiac Solstice and Saturn Sky need to be repaired. Those are the vehicles that form the basis of the Canadian suit against General Motors.
The new head of GM apologized earlier this week saying the company took too long to notify owners about the needed repairs. The company has acknowledged it learned about the problem switches at least 11 years ago, yet it failed to recall the cars until last month. Chief executive Mary Barra, who took the leadership role in mid-January, said the company takes responsibility for mishandling the defect and would do what’s right for customers. GM also announced it was hiring a new head of global safety. Barra stopped short of saying the company would compensate families killed in crashes caused by faulty ignition switches. That number is likely to rise above the 12 currently cited by the company as GM and the National Highway Traffic Safety Administration review accident reports and consumer complaints. “I am very sorry for the loss of life that occurred, and we will take every step to make sure this never happens again,” Barra said on Tuesday.
An internal investigation is underway and will take about seven months to complete. In the meantime, the company has not contacted the families, she said. On Monday, GM issued a new recall of 1.5 million larger vehicles, including 70,437 in Canada, because their side air bags, front centre air bags and seat belts may not work properly if drivers ignore a warning light on their dashboard. [Emphasis added]