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Toyota to pay $1.2B to settle criminal probe

By Eric Tucker & Tom Krisher

Associated Press

LAST UPDATED: 01:56 p.m. HST, Mar 19, 2014

WASHINGTON >> 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 adequately addressed an acceleration problem stemming from ill-fitting floor mats-- which attracted widespread publicity 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 had not recalled other models susceptible to the same problem and also took steps to conceal from regulators 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," Holder said at a news conference.

According to a statement of facts filed in the case, an exasperated Toyota employee was said to have remarked at one point, "Idiots! Someone will go to jail if lies are repeatedly told. I can't support this."

Toyota said in a statement that in the four years since the recalls it had "made fundamental changes to become a more responsive and customer-focused organization, and we are committed to continued improvements."

The company's finances have recovered from the recalls, as well as the recession and the 2011 tsunami in Japan. But its once-sterling reputation for quality and reliability has been tarnished, and its market share is still below where it was in 2009.

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., totaling 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 totaling 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.

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.

Toyota's U.S. market share, however, has fallen more than 4 percentage points since unintended acceleration came to the forefront in August of 2009, when a California Highway Patrol officer and three others were killed in a fiery crash.

At the time, Toyota controlled 17.8 percent of the U.S. market. Gas prices were high, favoring Toyota's fuel-efficient small cars and hybrids. Detroit automakers were in serious financial trouble and had few fuel-efficient cars for sale.

By last month, though, Toyota's share totaled just 13.3 percent, according to Autodata Corp. Citi research analyst Itay Michaeli estimated last week that the recalls have cost Toyota more than 1 percentage point of market share. And the Detroit and South Korean automakers now sell more competitive small and midsize cars.

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.


Krisher contributed from Detroit

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honupono wrote:
Greed lust.
on March 19,2014 | 08:54AM
1local wrote:
GM will top Toyota's fine. Only a matter of time till GM goes belly up...
on March 19,2014 | 01:26PM
awahana wrote:
Yep. After being a Toyota family for many generations, we've already written off Toyota, as well as Sony, Sharp, and Olympus.
Japan, Inc. is in bad shape. Not much different than buying Chinese made. Sanyo, Sharp, and Mitsubishi PV modules are failing on Japan rooftops after just 8 years in use. People still buy, because of the familiar name, and pay more, and get less.
If you still buy Toyota and Sony, because of their reputation, you are living in the 80's, and probably still shop at Sears and have a HawTel landline...
on March 19,2014 | 10:57AM
dontbelieveinmyths wrote:
The data proves you wrong. Try looking at some Consumer Reports issues. Here's the conspiracy theory: Holder is a puppet for Obama. Trying to prop up the failure of the GM bailout.
on March 19,2014 | 11:17AM
cojef wrote:
You are not wrong. Toyota's problem started in 2009 with the Lexus incident death. Don't know how many others died, but would venture less than the 12 deaths reported over a 13 years period for General Motors. Then, GM should at least be assessed the same amount or more than $1.2 Billion since the period of deceit is longer and possibly caused more death. The NHTSA is contemplating assessing GM with a fine of only $35 Million. Unfair competition by a foreign auto company because they make a better car so fine them! That's how to level the playing field.
on March 19,2014 | 11:54AM
konag43 wrote:
i have a toyota truck and i don't beleive it was the floor mats that are causing the accidents but the drivers themselves . every car dealers have problems but i am not going to chge the type of veh i drive because of a few problems. just recently i have driven a honda fit and a nissan altima and a nissan frontier all three vehicles dont drive as good as a toyota. all three vehicles did not seat you in the seat so that the sun does not shine in your eyes. the sun visors are a waist of time whereas the toyota sits you just right so the sun does not shine in your eyes with the use of the visor. i put up a toytoa any day for how good it handles.,
on March 20,2014 | 04:17PM
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