Toyota Recalls for Acceleration Issues: $1.2 Billion in Fines

The US Justice Department fined Toyota Motors, the Japanese auto maker, $1,200,000,000, that’s 1.2 billion dollars.  It is the largest ever punitive action of its’ kind against a car company.  Allegations were numerous and those making the allegations against Toyota were members of the highest legislative body in America.  Toyota was accused of lying to investigators, regulators and the American public at large about the acceleration problem which was claimed to be the cause of injuries and even death.

Prosecutors say Toyota concealed the acceleration problem in an effort to protect its corporate image, worrying more about profits than the safety of consumers.  Early on, Toyota claimed that these cases of uncontrollable acceleration were the result of driver error.  This worked for another auto maker 20 years ago, and Toyota was going to see if lightning could strike twice.   Even after issuing recalls to address problematic floor mats which were said to have pinned down accelerators in many cases, Toyota concealed a defective gas pedal design that it knew did the same thing as the mats.

Acceleration issues, haven’t we seen this before?

This is not the first time that a car manufacturer has been in hot water with Congress for the same issues.  Audi, the German luxury car maker, was fined and found negligent in failing to warn consumers of a similar sudden-acceleration problems.  In the early 1990’s Congress subpoenaed Audi engineers and executives in hearings on the claims that sudden acceleration had been occurring and the many people were injured by these accident.  Audi claimed for years that the problems were user error, drivers were pushing the wrong peddle.  In this case, Audi was vindicated by National Highway Transportation Safety Administration (NHTSA) investigations that showed a majority were just as Audi claimed.  Audi did re-engineer the pedals to be further apart and was one of the first to make it impossible to start a car without your foot firmly on the brake.   After all of this, however, Audi, vindicated and all, still lost nearly a decade of profitable car sales in the US.  It was not until 2000 that they were able to reach the sales figures per year that they recorded in 1985.

Toyota admits the problem, issues recall.

An incident on the California highways in 2009 was the ‘game changer’ in public opinion of what was really going on in the defective Toyotas and their luxury brand sister, Lexus.  A California Highway Patrol officer, Mark Saylor, was a passenger along with his wife and daughter in a car driven by his brother-in law were all were killed when the car crashed and burned off the side of the roadway.  It was suspected that it was caused by the unintended acceleration of his car. The entire episode was recorded in a 911 emergency call that described speeding out of control, at speeds of more than 125 mph in the Lexus before the car crashed.

Toyota had apparently known about the problem for some time and was quietly changing defective parts without an explanation to regulators about reasons for these exchanges.  Acceleration problems surfaced in Europe in 2008, and in 2009 Toyota gave European dealers instructions on how to change out the defective pedal design.  As this was going on, Toyota continued to claim that the accidents were driver error and they had not evidence otherwise.

Finally by late 2009, regulators were advised of a recall and then once the recall began, Toyota lied to the government on its timeline to replace the defective parts and how notice was given to owners of the cars that might have defective pedals.  That was more than the Justice Department could take and decided to make an example of Toyota.  When the amount of the fine was made public it was so large that industry analysts were concerned about Toyotas ability to survive such a hit.  It turns out that $1.2 billion is less than one-third of Toyota’s annual profit for the year 2009.

As part of the settlement with the US Government, Toyota says that it misled Americans by making false statements about the acceleration issue.  They admitted to making deceptive statements about the safety problems and blaming them on driver error.  This admission was diametrically opposed to their reputation of a brand build on safety and reliability.

US Automaker put on notice…

The deal was seen as a victory for the government and could serve notice to General Motors, which is also under investigation by Congress.  GM has safety regulators and federal prosecutors calling ‘foul’ because GM has taken more than a decade to issue a recall for an ignition-switch problem.  These ignition problems have been said to have caused 31 serious accidents that have resulted in 12 deaths.

“Companies that make inherently dangerous products must be maximally transparent, not two-faced,” said Preet Bharara, U.S. attorney for the Southern District of New York, who led the Toyota investigation and — according to a law enforcement source who spoke on the condition of anonymity because he was not authorized to discuss the topic — has launched a preliminary criminal probe of GM. “That is why we have undertaken this enforcement action. And the entire auto industry should take notice.”


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