/ 21 December 2010

Toyota to pay $32m fine in US safety probe

Toyota To Pay $32m Fine In Us Safety Probe

Toyota has agreed to pay the maximum fine of $32,4-million related to two US probes into its handling of a spate vehicle recalls that hurt sales and tarnished its once impeccable reputation for quality.

The settlements conclude a tumultuous year for the world’s largest car-maker over the recalls of 11-million vehicles in the United States and disclosure of problems blamed by safety advocates for hundreds of crashes and the deaths of dozens of people.

The crisis prompted unprecedented government scrutiny over unintended acceleration complaints, a total of three heavy fines, and a loss of prestige and consumer confidence in Toyota’s best-selling cars.

“I am pleased that Toyota agreed to pay the maximum possible penalty and I expect Toyota to work cooperatively in the future to ensure consumer safety,” Transportation Secretary Ray LaHood said in a statement that accompanied the late night announcement in Washington on Monday.

Toyota said it agreed to the National Highway Traffic Safety Administration (NHTSA) fines without admitting any violation of law.

Sales targets rise
“It’s positive that Toyota will get past this event and can focus on quickly restoring its brand image in the US market,” Yoshihiro Okumura, general manager at Chibagin Asset Management in Tokyo, said of the fines.

“US sales should be the major driver for the stock.”

Toyota said separately on Tuesday it planned to boost its group-wide global vehicle sales by 3% to 8,61-million units in 2011, led by 9% growth in the United States to 1,9-million vehicles.

Toyota was the worst performer among major car-makers in the US this year, with a rise of just 0,2% in its single-biggest market, which expanded 11,2% in the year to date.

Jesse Toprak, a senior analyst with Truecar.com, said settlements with the government are a good first step, but that regaining consumer trust in a hotly contested US market would take years.

“It won’t go away. It will be an ongoing struggle,” he said.

Toyota is counting on sales growth of between 7% and 9% in China, North America and Europe, and an 11% rise in Asia to make up for an estimated 17% drop in its domestic sales in 2011.

It expects parent-only sales, which exclude mini-vehicle unit Daihatsu Motor and truck unit Hino Motors , to rise 3% to 7,7-million vehicles next year.

Insufficient action
With the latest fines, Toyota has agreed to pay almost $50-million to US regulators this year, including a $16,4-million fine, the maximum allowed, in April. That was over allegations it failed to notify the government in a timely way about gas pedals that would not spring back as designed.

The two latest fines involved recalls and allegations by the US government that initial action taken by Toyota to address safety problems earlier this decade was insufficient and the required notification of problems to regulators was not timely, as required by law.

The first investigation involved Toyota’s limited recall in 2007 of all-weather floormats that could jam the accelerator, a case that was held up in congressional hearings in February as an example of lax NHTSA oversight of the car-maker.

It was only after a crash two years later in California that killed four people that regulators facilitated a much larger floormat recall in 3,8-million Toyota and Lexus vehicles. The recall was widened in January of this year to include another 1,1-million vehicles.

NHTSA ultimately determined that Toyota did not notify regulators of the full scope of the problem in a timely manner.

The second investigation involved Toyotas with suspected steering problems.

An initial recall of Hilux trucks was conducted in Japan in 2004 for steering rods prone to cracks and Toyota told US regulators that the problem was isolated to that country. A year later, US regulators were told the problem was also found in several models sold in the US and conducted a recall of one million vehicles. NHTSA alleged that Toyota was not forthcoming enough on that issue either.

The “sticky pedal” recall of 2,3-million vehicles and the floormat recall are at the centre of consumer complaints of unintended acceleration in Toyota and Lexus vehicles that remains under investigation by NHTSA. A report on that review, which includes help from Nasa scientists evaluating electronic throttles, is due out early next year. — Reuters