Toyota Motor Corp. (7203) has reached a $1.2 billion settlement to end a U.S. criminal probe of sudden unintended acceleration that led to the recall of more than 10 million vehicles, two people familiar with the matter said.
The settlement, which isn’t final, may be announced as early as today, said the people, who asked not to be named because the accord isn’t public. The probe examined whether Toyota made false or incomplete disclosures to regulators about defects in its cars, and how it handled drivers’ complaints, said a third person, who also asked not to be identified.
The recalls blemished Toyota’s reputation for quality that spurred its rise to become the world’s top-selling automaker, a title the company relinquished for one year to General Motors Co. (GM) A settlement would put Toyota a step closer to resolving legal fallout of those recalls as GM faces probes into how it handled defective ignition switches blamed for at least 12 deaths.
“It’s a big number to pay and yet Toyota’s also a company that can most easily digest that kind of a number and move forward,” Karl Brauer, an analyst at auto researcher Kelley Blue Book, said by telephone.
U.S. regulators and officials, including the Federal Bureau of Investigation’s New York office, are probing GM after the recall of 1.6 million Chevrolet Cobalts and other small-car models because of faulty ignition switches the company said were linked to a dozen fatalities. On March 17, GM said it’s recalling 1.55 million vans, sedans and sport utility vehicles, citing concerns over brakes, seat belts and air bags.
“GM is just getting started on its path to resolution and will probably be working to resolve the ignition switch recall for some time,” Brauer said in an e-mailed statement.
Jerika Richardson, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment on the Toyota settlement. Kelly Langmesser, a spokeswoman for the FBI in New York, also declined to comment.
“Toyota has cooperated with the U.S. Attorney’s office in this matter for more than four years,” Steve Curtis, a Toyota spokesman, said in an e-mailed statement. “During that time, we have made fundamental changes to become a more responsive and customer-focused organization, and we are committed to continued improvements.”
Curtis declined to comment on a possible settlement, which was reported earlier by CNN.
Toyota recalled more than 10 million vehicles worldwide in 2009 and 2010 following complaints of sudden, unintended acceleration. The Toyota City, Japan-based company made modifications to gas pedals and floor mats that were prone to shifting around and jamming the accelerator. Toyota also installed brake override software on recalled models and began making the systems standard on new vehicles.
In addition to the criminal probe by the Manhattan U.S. Attorney’s office and the New York office of the FBI, Toyota’s recalls also led to lawsuits claiming defects harmed the value of Toyota vehicles or caused accidents leading to death and injury. Toyota settled lawsuits brought by car owners who claimed economic losses for about $1.6 billion.
Toyota fell 0.8 percent to 5,508 yen in Tokyo, compared with the 0.1 percent decline by the benchmark Topix Index. The stock has lost 14 percent this year.
Toyota last year agreed to try to resolve the personal injury and wrongful death lawsuits that were brought in the wake of the recalls.
In a March 17 status report filed in federal court in Santa Ana, California, Toyota and lawyers representing the plaintiffs said they had reached agreements in principle to settle 131 cases. The carmaker is trying to settle more than 300 cases, according to the filing.
Terms of the settlements weren’t disclosed.
Toyota surrendered global auto sales leadership to Detroit-based GM in 2011 after Japan’s tsunami and floods in Thailand disrupted production. The automaker has regained the global sales crown the past two years and has returned rankings at or near the top of automotive quality ratings.
Consumer Reports this year recommended 11 of the company’s cars in its picks for the best used vehicles from the last 10 model years, almost double the tally for Honda Motor Co., the second-best performer. Toyota’s Lexus luxury division led the magazine’s annual ranking of brands and its namesake brand finished fifth in results released last month.
J.D. Power & Associates said last year that while GM outperformed Toyota in its annual Initial Quality Study for the first time, the Japanese carmaker’s namesake and Lexus brands both finished among the industry’s top seven.
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