Toyota Settlement Over Unintended Acceleration Cases To Exceed $1 Billion


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    Toyota Logo Picture

    Toyota will spend over $1 billion to resolve lawsuits related to reduced values due to alleged unintended acceleration issues. | December 27, 2012

Just the Facts:
  • Toyota will spend over $1 billion to compensate owners for a loss in value of their vehicles due to recalls related to unintended acceleration, the automaker announced on Wednesday.
  • "This was a difficult decision - especially since reliable scientific evidence and multiple independent evaluations have confirmed the safety of Toyota's electronic throttle control systems," said Christopher P. Reynolds, general counsel for Toyota Motor Sales USA, in a statement.
  • The settlement is valued between $1.2 and $1.4 billion, which includes direct payments to consumers as well as the installation of a brake-override system in an estimated 3.25 million vehicles, according to a statement by plaintiffs' lawyers.

NEW YORK — Toyota will spend over $1 billion to compensate owners for a loss in value of their vehicles due to recalls related to unintended acceleration, the automaker announced on Wednesday.

"This was a difficult decision - especially since reliable scientific evidence and multiple independent evaluations have confirmed the safety of Toyota's electronic throttle control systems," said Christopher P. Reynolds, general counsel for Toyota Motor Sales USA, in a statement. "However, we concluded that turning the page on this legacy legal issue through the positive steps we are taking is in the best interests of the company, our employees, our dealers and, most of all, our customers."

The settlement is valued between $1.2 and $1.4 billion, which includes direct payments to consumers as well as the installation of a brake-override system in an estimated 3.25 million vehicles, according to a statement by plaintiffs' lawyers.

The proposed settlement does not cover claims for wrongful death or injuries, according to media reports.

"The settlement is a nod to loyal Toyota owners whose car resale values were hurt by the unintended acceleration issue and the intense publicity that followed," said Michelle Krebs, Edmunds.com senior analyst. "A billion-dollar payment will sting any company, even a major international automaker like Toyota.

"But by announcing the settlement, Toyota hopes to leave these troubles behind and move forward in the new year. Toyota's other big news this week - it's poised to overtake GM and reclaim the crown as the world's biggest automaker - should help to offset any bad publicity that this settlement will generate."

Approximately 16 million Toyota, Lexus and Scion vehicles from model years 1998 to 2010 and sold in the U.S. are covered by the proposed settlement. The vehicles include the Toyota Camry and Toyota Corolla. Toyota's recall of more than 10 million vehicles between 2009 and 2011 tarnished the automaker's reputation for safety and reliability.

If the economic loss settlement is approved by the judge supervising multidistrict litigation pending in the U.S. District Court for the Central District of California, Toyota said it will launch a new customer-support program that will provide "prospective supplemental coverage for certain vehicle components and will retrofit additional non-hybrid vehicle models subject to the floor mat recall with a free brake override system to provide an added measure of confidence."

Judge James V. Selna is expected to review the proposed settlement on Friday, according to plaintiffs' attorneys.

Hagens Berman, the law firm representing Toyota owners, said the settlement establishes a fund of $250 million to be paid to former Toyota owners who sold their cars during the period from Sept. 1, 2009 through Dec. 31, 2010, to compensate those owners for alleged reduced value as a result of the publicity concerning unintended acceleration.

A separate fund of $250 million will be established to compensate current owners whose vehicles are not eligible for a brake-override system, Hagens Berman said. The amount consumers receive depends on the model and year of their Toyota, and the state in which the car was purchased.

The settlement also provides that all 16 million current owners will be eligible for a customer care plan that will warranty certain parts that plaintiffs allege are tied to unintended acceleration for between three and 10 years.

Toyota said that consumers are asked to visit www.toyotasettlement.com or call 1-877-283-0507 for more information on the economic loss settlement.

Edmunds says: Compensating owners for a loss in value of their vehicle should help Toyota shore up its reputation in the short term. The much stickier issue of alleged injuries from unintended acceleration is still unresolved and is likely to remain a problem for years to come.

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