Toyota shares up after US settlement seen smaller than expected

TOKYO Wed Dec 26, 2012 8:51pm EST

TOKYO Dec 27 (Reuters) - Shares of Toyota Motor Corp gained 1.6 percent on Thursday on relief that its proposal to pay $1.1 billion to settle U.S. class-action litigation claims over unintentional acceleration in its vehicles was smaller than expected.

Toyota said it would take a one-time pretax charge of $1.1 billion to cover the estimated costs of the settlement, court filings showed, as the carmaker looks to turn the page on the biggest safety crisis in its history.

Problems with unintended acceleration in Toyota vehicles led to a series of recalls between 2009 and 2011, leading the firm to pull back more than 10 million vehicles worldwide and denting its reputation for quality.

The settlement terms include a $250 million fund for former Toyota owners who sold vehicles at reduced prices because of bad publicity, and a separate $250 million fund for owners not eligible for the brake override system.

"My initiate reaction would be 'that's it' ... $1 billion charge that covers recalls and everything else and you are looking at a $250 million compensation fund, that's nothing," a senior trader at a foreign brokerage said.

The trader added that it removed the uncertainty hanging over Toyota's share price.

Toyota shares gained 1.6 percent to 3,890 yen in midmorning trade. The stock has risen 51.7 percent this year, outpacing a 36.5 percent gain in the Topix's transport equipment subindex , home to Toyota and other automakers.

Adding to positive sentiment for Toyota shares was the carmaker's announcement the previous day that it expects to achieve record-high groupwide global sales and production in calendar year 2012. Groupwide figures include Daihatsu Motor Co and Hino Motors Ltd.

A sharply weaker yen also buoyed hopes that the company's earnings will be better than expected.

While Toyota has assumed an average exchange rate of 79 yen to the dollar for the fiscal year ending in March 2013, the yen fell to 85.78 to the dollar on Thursday, a more than two-year low, after Japan's new prime minister vowed to weaken the currency and implement aggressive economic stimulus.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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