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Toyota now Facing a Record Fine of $16.4 Million to go Along with an Already Tarnished Image and Billions in Potential Claims

Mar 1, 2010

Toyota now Facing a Record Fine of $16.4 Million to go Along with an Already Tarnished Image and Billions in Potential Claims

For many years, Toyota, the world’s largest automaker, enjoyed a spotless reputation for quality, safety, and reliability as well as high resale value. Then, by what appears to be a classic example of placing profits over safety the company is scrambling to salvage whatever part of that once unblemished image remains.

This cataclysmic fall from the pinnacle of the auto industry has resulted from the recall of several million of Toyota’s most popular models to correct significant defects associated with braking and unexpected and uncontrolled acceleration. According to some estimates, this record number of recalls comes with potential claims and related losses that could range from $2 billion to $3 billion.

Adding to Toyota’s woes, the National Highway Traffic Safety Administration (NHTSA) has now fined the company a record $16.4 million for failing to follow government regulations requiring automakers to notify the NHTSA within five days of identifying a safety defect.

On April 5, U.S. Transportation Secretary Ray LaHood stated: “We now have proof that Toyota failed to live up to its legal obligations. Worse yet, they knowingly had a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families.”

These revelations follow a government investigation to discover whether Toyota initiated the recalls in a timely manner with regards to their knowledge of the safety defects in their vehicles. It now seems clear that executives at Toyota blatantly ignored years of warnings from consumers, as well as its own engineers.

As additional information comes to light, it has become apparent that the secretive corporate culture in Japan often clashed with U.S. requirements that automakers disclose safety threats. The relationship soured despite the fact that Toyota hired two former NHTSA officials to manage its relationship with the agency. Recent reports indicate Toyota not only knew these safety problems existed but were also made aware of severe quality control issues and unhealthy employee conditions had the potential of leading to the very type of company-wide catastrophe that is currently unfolding.

Toyota’s intentional withholding of vital safety information will now become a significant factor in personal injury, wrongful death, and property damage claims arising from accidents involving the affected models. While that may lead to substantial settlements or damage awards, the likelihood is that Toyota will have adequate insurance coverage for those situations.

A more serious problem for Toyota, however, could be the devaluation of its stock and class action lawsuits from unhappy owners who have seen a significant decrease in the resale value of their Toyota vehicles.

While the problem of sudden and uncontrollable acceleration has allegedly caused hundreds of accidents and at least 56 deaths over the past decade, according to police reports and complaints filed with the NHTSA, Toyota does not appear to have aggressively sought to isolate the actual cause of the problem.

At first, the sudden acceleration was linked to the design of the floor mats and later to the shape of the gas pedals. That simplistic view of the problem proved to be short lived when the replacement of the floor mats and gas pedals did not remedy the situation. In fact, Toyota officials admitted to a Congressional committee in February that the underlying cause of the unintended acceleration had not been identified and that the company may not know the cause of unintended acceleration in as many as 70 percent of reported incidents

Toyota’s President apologized before the same Congressional committee after a document was released in which Toyota executives boasted about saving money by averting recalls. The July 6, 2009 document, which was sent to the House Oversight Panel, said the company saved $100 million through a negotiated “equipment” recall. The document was a bullet-point presentation on savings, outlining accomplishments described as “Wins for Toyota.”

It has been widely speculated that Toyota’s electronic throttle control system is at the heart of the problem, although Toyota maintains this is not the case. Some automotive experts have now turned their attention to Toyota’s engine design.

As if Toyota’s problems were not serious enough with respect to the uncontrollable acceleration, other models have been found to have defects within their steering mechanisms, cracks in their drive shafts, and faulty brakes. A full list of all recalled models can be found at .

The U.S. Department of Transportation’s inquiry into whether Toyota Motor Corp. conducted three of its recent recalls in a timely manner has centered on production data, incidents, consumer complaints, warranty complaints, copies of tests, dates of meetings, timelines and supplier information

The evidence now appears clear that Toyota chose not to fix the problems but, rather, to minimize them. Thus, the safety of their customers was not the top priority at the company. According to an analysis of NHTSA data, complaints of sudden acceleration began at least seven years ago and grew to 400 complaints by 2007.

As government agencies, Congress, and consumer watchdog groups delve deeper into Toyota’s corporate psychology, what is being uncovered is far from what would be expected of a company that had enjoyed such an unblemished record over so many years. For example, an internal memo written by a group of veteran Toyota engineers outlined the changes they had seen take place in recent years and the dangerous path in which the company was heading. As Toyota ramped up production to fill the growing demand for smaller, gas-efficient vehicles, the engineers watched the company take dangerous safety and manpower shortcuts to lower costs and boost output.

Toyota's failure to act, they pointed out, could potentially "become a great problem that involves the company's survival." They added, "We are concerned about the processes which are essential for producing safe cars, but that ultimately may be ignored, with production continued in the name of competition." Although the engineers delivered the letter directly to management, Toyota executives never responded to it.

For years before the recent recalls, Toyota was warned about declining product quality and deteriorating working conditions at its Japanese plants. Many workers were pressured to work grueling overtime hours without pay, which even resulted in a death of one worker. Similar practices were emerging in the company’s United States plants as well.

In 2008, the National Labor Committee, a U.S. human-rights advocacy group, released a 65-page report titled "The Toyota You Don't Know," detailing serious human-rights violations. The report linked Toyota to human trafficking and sweatshop abuse in connection with its importing of foreign guest workers from China and Vietnam to work in its Japanese factories.

In an interview, Tadao Wakatsuki, a 62-year-old veteran assembly line worker and union leader, noted what he calls the deterioration in working conditions and product quality. He listed a litany of concerns, including outsourcing key design work and shortening the trial-and-error period for new cars.

"We used to test every one of our cars for safety and quality," said Wakatsuki, "now we do maybe 60%. The old 100% is a thing of the past." In its quest to dominate the global automotive market, Toyota knowingly cut corners at the expense of safety, quality, and employee morale.

Sales of Toyotas skyrocketed over the past decade, thanks in part to the massive surge in popularity of its hybrid Prius models. Rather than address the problems that were repeatedly brought to the company’s attention, Toyota did everything in its power to cover up the problems in order to avoid a recall. Toyota sacrificed product quality control, and in turn their brand’s image of reliability, in order to ramp up production in order to meet the increased market demands.

Consumer Reports, which traditionally had high marks for Toyotas, has removed their recommended stamp of approval for the affected models.

If you or a loved one has been injured, or a relative has died in an accident resulting from Toyota’s negligence, or you have incurred expenses due to the need to rent a replacement vehicle, or you believe your Toyota’s resale value has diminished, please visit, or call 1-800-YOURLAWYER (1-800-968-7529) to discuss your case with one of our Toyota recall lawyers.

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