Toyota reaches $1.1 billion settlement in class-action suit over unintended acceleration

Owners of 16M cars to get reimbursed

 

Toyota Motors agreed to pay $1.1 billion to install new safety features and reimburse owners of up to 16 million cars to settle a class-action suit filed by drivers who had problems with unintended acceleration in its cars in 2009-2010.

This is one of the largest lawsuits of its kind, according to Steve Berman, one of the lead plaintiff lawyers.

The company said that the settlement will lead to a one-time, $1.1 billion pre-tax charge against fourth quarter earnings to cover the costs.

Under the agreement, Toyota will install a brake-override system in cars where floor mats got stuck, leading them to accelerate unintentionally. The company will also set up a fund of $250 million to be paid to former Toyota owners who sold their cars between Sept. 1, 2009, and Dec. 31, 2010, to compensate the owners for the reduced value of the cars from the negative publicity.

A separate fund of $250 million will be established to compensate current owners whose vehicles are not eligible for a brake-override system.

All 16 million current owners will be eligible for a customer care plan, that will provide a warranty on certain parts tied to unintended acceleration for between three and 10 years.

Until these issues, Toyota held the top reputation for vehicle quality and safety. But it has been dogged by significant recall problems over the last three years. It has already announced recalls of more than 10 million vehicles worldwide for various problems so far this year.

Earlier this month, the car company agreed to pay a record $17.4 million to the National Highway Traffic Safetey Administration for problems related to a 2012 recall in one of its Lexus models. That's the largest fine allowed by law for a single investigation.

And in November, it recalled 7.43 million cars due to a power window problem that poses a fire risk.

Toyota’s settlement over accelerator pedals that are sticking coincided with the ABC News and 10News investigations concerning sudden acceleration problems in certain Toyota models.

A tragic 2009 crash in Santee off the 125 started the investigation into sudden acceleration. A passenger in the car called 911 saying, "Our accelerator is stuck. We're in trouble. We can't ... there's no brakes."

San Diegan Mark Saylor, an off duty California Highway Patrol officer and his family died after their loaner Lexus ES 350 sped out of control and crashed.

After the Santee crash, Toyota issued a recall of 4.2 million cars, saying the floor mats were improperly installed, likely causing the accelerators to get stuck.

Then in December 2009, four Texans drowned after their Toyota Avalon allegedly suddenly accelerated, causing the vehicle to drive through a metal fence, into a pond near Dallas. The Avalon's floor mats were in the car's trunk, indicating they couldn't have been the cause of the acceleration.

"It's a huge problem that must get solved soon," said auto safety expert Sean Kane who reported seeing 56 incidents of runaway Toyota and Lexus vehicles since the floor mat recall.

"It seemed like the more I hit the brake, the more it wanted to accelerate," explained Kevin Haggerty, a New Jersey man who experienced sudden acceleration in his 2007 Toyota Avalon. He shifted into neutral and drove to his Toyota dealership.

"They replaced the throttle body and the accelerator pedal assembly," said Haggerty whose experience showing the Avalon to Toyota dealership staff was the first known sudden acceleration incident to be witnessed by Toyota representatives.

In a statement on the acceleration issue in 2012, Toyota spokesman Brian Lyons said:

"Toyota takes the issue of unwanted acceleration very seriously, as underscored by our ongoing recall. As part of our commitment to the safety of our customers and the public, Toyota constantly monitors product reports and customer complaints and works to identify any defect trends. We are confident that we're doing the right thing for our customers, and we will continue to do so. We will remain vigilant in thoroughly investigating incidents of unwanted acceleration, including those cited by ABC, and taking appropriate measures to address any defect trends that are identified."