Toyota Paying $1.2 Billion for Covering up Safety Defects

The car manufacturer is paying a $1.2 billion criminal penalty for covering up safety defects.

The New York Times reports that Toyota faces a $1.2 billion criminal penalty for covering up safety defects in certain models of its cars and not being forthcoming with car owners about the defect. According to the article, the government investigated the car manufacturer for four years and found the company guilty of concealing information about car defects from both consumers and the government. The defect in question put motorists' lives at risk as it caused unintended acceleration of cars.

U.S. Attorney General Eric Holder announced the penalty March 19, saying it is the largest an automaker ever has agreed to pay in such a U.S. case. "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. As Toyota admits in the Statement of Facts filed alongside the criminal information in this case, the company 'made these misleading statements and undertook these actions of concealment as part of efforts to defend its brand,' he said. "In other words, 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 like the one that took the lives of an off-duty California Highway Patrol officer and members of his family. As part of the resolution of this case, Toyota will fully admit wrongdoing. It will pay a financial penalty of $1.2 billion. And, going forward, the company will submit to rigorous review by an independent monitor that will examine and assess the manner in which Toyota reports safety issues to the public and its regulator.

"The $1.2 billion payment represents the largest criminal penalty imposed on a car company in U.S. history. This is appropriate given the extent of the deception carried out by Toyota in this case. Put simply, Toyota's conduct was shameful," Holder continued. "It showed a blatant disregard for systems and laws designed to look after the safety of consumers. By the company's own admission, it protected its brand ahead of its own customers. This constitutes a clear and reprehensible abuse of the public trust."

In 2009 and 2010, Toyota recalled more than 10 million cars for unintended acceleration problems and fixed the problem by modifying gas pedals and floors mats and making brake-override systems standard on new models. Despite this, the company still faces several wrongful death and personal injury lawsuits in subsequent years.

Toyota issued a statement in which Christopher P. Reynolds, chief legal officer for Toyota Motor North America, said, "At the time of these recalls, we took full responsibility for any concerns our actions may have caused customers, and we rededicated ourselves to earning their trust. In the more than four years since these recalls, we have gone back to basics at Toyota to put our customers first. We have made fundamental changes across our global operations to become a more responsive company – listening better to our customers' needs and proactively taking action to serve them. Specifically, we have taken a number of steps that have enabled us to enhance quality control, respond more quickly to customer concerns, strengthen regional autonomy, and speed decision-making. And we're committed to continued improvement in everything we do to keep building trust in our company, our people, and our products. Importantly, Toyota addressed the sticky pedal and floor mat entrapment issues with effective and durable solutions, and we stand behind the safety and quality of our vehicles. Entering this agreement, while difficult, is a major step toward putting this unfortunate chapter behind us. We remain extremely grateful to our customers who have continued to stand by Toyota. Moving forward, they can be confident that we continue to take our responsibilities to them seriously."

Since the recalls, Toyota has created rapid-response teams to investigate customer concerns quickly, and it committed $50 million in 2011 to launch Toyota's Collaborative Safety Research Center in Ann Arbor, Mich., to partner with universities and institutions across North America on safety advances for the automotive industry.

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