Toyota admits hiding safety defects; penalised $1.2 bn

Japanese carmaker Toyota Motor Corp yesterday agreed to pay a record $1.2 billion to US regulators to settle a criminal investigation over hiding safety defects related to ''unintended acceleration.''

The fine, the largest criminal penalty imposed on a car company in US history by the Justice Department (DoJ), will serve as a template for regulators on the ongoing criminal investigation on General Motors over its mishandling of ignition switch failures that have led to the death of 12 people.

The DoJ said the just concluded four-year investigation on the widespread incidents of unintended vehicle acceleration on certain Toyota vehicles between 2009 and 2010, revealed that Toyota concealed information about defects from consumers and regulators, putting lives at risk because of faulty parts, while it sought "to defend its brand".

''Rather than promptly disclosing and correcting safety issues about which they were aware, Toyota made misleading public statements to consumers and gave inaccurate facts to members of Congress.  And they concealed from federal regulators the extent of problems that some consumers encountered with sticking gas pedals and unsecured or incompatible floor mats that could cause these unintended acceleration episodes,'' the DoJ said in a statement (See: Toyota's frequently asked questions for the "sticking accelerator pedal recall). 

Backed by a rock-solid reputation for safety and quality, Toyota, the world's largest and most profitable automaker was battered after it was forced to make the largest recalls in history.

Between 2009 and 2010, the Japanese carmaker recalled nearly 14 million vehicles worldwide over improperly installed floor mats and sticky gas pedals that caused sudden unintended acceleration.

Although regulators have yet to find out the exact number of deaths related to the defect, the company still faces several lawsuits.

Toyota, which has more than $60 billion in cash reserves, has already paid $66 million in civil penalties and last July agreed to pay $1.6 billion to compensate vehicle owners for financial losses from the fall in the value of their cars arising from design defects (See: Toyota to pay US customers $1.6-bn for fall in value of cars due to acceleration problems).

The DoJ said that While Toyota conducted a limited recall of some vehicles with floor mat issues in September 2009, the company delayed a broader recall until early 2010 – despite internal tests warning of the dangers posed by other, unrecalled vehicle models. 

Toyota admitted that it made these misleading statements in order to defend its brand, but the regulator said, ''Toyota confronted a public safety emergency as if it were a simple public relations problem.  And they mounted this coverup despite widely-documented incidents, and even tragic accidents.''

As part of the resolution, Toyota will fully admit wrongdoing and pay a financial penalty of $1.2 billion.  It will also submit to rigorous review by an independent monitor that will examine the manner in which Toyota reports safety issues to the public and the regulators.

(See: US attorney general Eric Holder announces criminal charge and deferred prosecution agreement with Toyota)