U.S. officials will seek over $16 million in civil fines against Toyota for "knowingly hiding a dangerous defect" from the agency and American consumers. Department of Transportation Secretary Ray LaHood announced the penalty on Monday via the agency's website.
"We now have proof that Toyota failed to live up to its legal obligations,” said LaHood’s statement. "Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families. For those reasons, we are seeking the maximum penalty possible under current laws."
The penalty, which Toyota has 2 weeks to dispute, focuses on “sticky” gas pedals, which NHTSA says Toyota knew about for four months before alerting government officials. Auto manufacturers are legally obligated to notify the agency within five business days if a safety defect exists. The sticky pedal recall now includes 2.3 million vehicles in the U.S., including the popular Camry sedan as well as eight other vehicles.
"NHTSA learned through documents obtained from Toyota that the company knew of the sticky pedal defect since at least September 29, 2009. That day, Toyota issued repair procedures to their distributors in 31 European countries and Canada to address complaints of sticky accelerator pedals, sudden increases in engine RPM, and sudden vehicle acceleration. The documents also show that Toyota was aware that consumers in the United States were experiencing the same problems."
Toyota has provided tens of thousands of pages of information to NHTSA related to the recalls and safety concerns over the company's products, which the agency says it continues to analyze. NHTSA has not ruled out introducing separate penalties; the $16.375 million penalty levied this week only includes the pedal recall.
Toyota has not yet seen the letter indicating the penalty from NHTSA.
"While we have not yet received their letter, we understand that NHTSA has taken a position on this recall," the company said via a statement on their media site. "We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance. These include the appointment of a new Chief Quality Officer for North America and a greater role for the region in making safety-related decisions."
Small Fine, But Could Increase Toyota's Liability
While the penalty won't hurt Toyota's bottom line ($16 million would represent a small fraction of the company's marketing budget), it indicates that LaHood's agency is under as much pressure as Toyota itself.
The new, stronger stance by U.S. officials and this week's fine could prove to be a guidebook for the current and future lawsuits presented to Toyota by plaintiff attorneys around the world. According to analysis done by Bloomberg, Toyota currently faces 177 consumer and shareholder lawsuits seeking class-action status and 56 lawsuits claiming personal injuries or death caused by sudden acceleration.
Toyota's recall problems did not seem to affect its ability to sell cars in March, however. The company was up 41% in March 2010 versus the same month in 2009, due in large part to massive incentives and 0% financing offered on some vehicles.
Whether or not Toyota will continue to offer deep discounts on its products in order to keep sales afloat remains to be seen, but in terms of pure market share Toyota has not fallen off a cliff as some posited earlier in the year.
"We are standing by our cars, and we're grateful that our customers are standing by Toyota," said Senior Vice President of Toyota Motor Sales Don Esmond last week.