Toyota to pay $1.2 billion in settlement with U.S. over recalls

Story highlights

  • Japanese auto giant also charged with wire fraud, but prosecution deferred
  • Toyota admitted to misleading consumers and regulators over unintended acceleration
  • It initiated massive recalls in 2009-10 following stepped up pressure from regulators
  • The Justice Department is now looking at how General Motors handled ignition switch problems
The Justice Department charged Toyota with wire fraud on Wednesday as part of a settlement with prosecutors that will require the auto giant to pay $1.2 billion for admittedly misleading consumers and the government over unintended acceleration.
According to an agreement signed by the Japanese company, Toyota executives responded to initial complaints about sticking gas pedals and unwanted acceleration by deceiving the public and trying to find ways to limit damage to its global brand.
Toyota at one point boasted internally about saving $100 million in costs by avoiding a full safety recall.
That strategy continued even after a 2009 incident in which a family of four in San Diego was killed when their Lexus suddenly accelerated to speeds of 100 miles-per-hour and crashed, Justice Department officials said.
Toyota wound up recalling millions of popular vehicles in 2009-10.
Attorney General Eric Holder said Toyota "confronted a public safety emergency as if it were a simple public relations problem."
The financial penalty is the largest for a car manufacturer and Justice Department officials said it represented an aggressive new strategy to deal with how companies handle safety recalls.
Under the agreement, the Justice Department will defer the criminal charge for three years, during which Toyota will submit to government monitoring.
The settlement ends a four-year probe by the Manhattan U.S. Attorney's Office, which is now looking at safety issues at General Motors.
GM has recalled 1.6 million vehicles worldwide over an ignition switch problem. GM engineers apparently knew about it years ago but the Detroit automaker did not move to recall vehicles until last month.
George Venizelos, FBI assistant director in charge of the bureau's New York office, blasted Toyota.
"The disregard Toyota had for the safety of the public is outrageous. Not only did Toyota fail to recall cars with problem parts, they continued to manufacture new cars with the same parts they knew were deadly," he said.
According to the agreement, Toyota admitted to deceiving U.S. safety regulators and members of Congress who conducted a separate inquiry.
Manhattan U.S. Attorney Preet Bharara said the company's deception even raised concerns among employees.
Bharara noted that one employee, in January 2010, said in response to the company's misleading public statements: "Idiots! Someone will go to jail if lies are repeatedly told. I can't support this."
Christopher Reynolds, chief legal officer for Toyota Motor North America said the company has made changes to be more responsive to customers.
"In the more than four years since these recalls, we have gone back to basics at Toyota to put our customers first," he said.
The company has settled similar allegations over unintended acceleration in agreements with a group of states, and has also settled with some vehicle owners.
The Transportation Department previously leveled stiff fines against Toyota for not promptly addressing safety problems related to unintended acceleration.
The National Highway Traffic Safety Administration (NHTSA) also came under scrutiny during the Toyota saga for not pushing the company harder in the early stages of their investigation into motorist complaints.
The recall crisis cost Toyota an estimated $2 billion in repair costs and lost sales, even before it had to pay out any legal settlements.