April 20, 2010 / 12:02 AM / 7 years ago

Toyota to pay $16.4 million fine, recall Lexus SUV

<p>A port worker inspects newly arrived Japanese made Toyota Land Cruiser SUVs at the port of Manila April 14, 2010. REUTERS/Erik de Castro</p>

DETROIT (Reuters) - Toyota Motor Corp on Monday agreed to pay a record $16.4 million federal fine for delaying a safety recall over defective accelerator pedals, and also announced a new recall -- this time of its 2010 Lexus GX 460 luxury SUV.

Toyota denied violating U.S. regulations and said it was paying the fine, the maximum allowed by U.S. law and the largest the regulator has ever sought, “to avoid a protracted dispute and possible litigation.”

The world’s biggest automaker also recalled the Lexus GX 460 after its engineers replicated a test by influential magazine Consumer Reports, which called the car a “safety risk” when the car lost control during a sharp turn. This recall came less than a week after the magazine report.

Toyota said it would recall nearly 10,000 Lexus GX 460 vehicles sold in the United States and Canada to fix software in the electronic stability control system. The GX 460 is new for the 2010 model year and has only been on sale for a few months.

The recall is the latest in a series of recalls and incidents that have tarnished Toyota’s once market-leading reputation for quality.

Toyota had estimated in February that the previous recalls would cost it $2 billion for its fiscal year ending in March, but it has recalled more vehicles since that estimate. Most analysts believe the costs will be significantly higher.

In imposing the record fine Toyota agreed to pay on Monday, U.S. regulators alleged that Toyota delayed by at least four months a January U.S. recall of 2.3 million vehicles due to defective accelerator pedals.

“We did not try to hide a defect to avoid dealing with a safety problem,” Toyota said in a statement.

U.S. Transportation Secretary Ray LaHood said Toyota had put consumers at risk by failing to report safety problems related to the defective accelerator pedals and the department’s investigations continued.

The department’s actions may provide further ammunition to plaintiff lawyers looking to bolster numerous legal claims against Toyota, which has recalled more than 8 million vehicles worldwide to repair defective accelerator pedals and prevent floormats from entrapping accelerators.

On Friday, Toyota also recalled 870,000 Sienna minivans sold in North America since the 1998 model year because of a risk that the spare tire could drop into the road.

“Toyota appears to be settling in for a long legal fight,” Gimme Credit analyst Craig Hutson said.

“We think the combination of legal costs, higher marketing costs, increased incentives and all that could easily be multiples of the $2 billion in costs for the 2010 year that Toyota has forecast,” Hutson said.

Some lawyers estimate Toyota faces potential civil liability of more than $10 billion in U.S. courts.

Toyota’s handling of U.S. safety recalls has sparked congressional hearings and inquiries by the U.S. Securities and Exchange Commission and a New York grand jury.

The recent addition of demands for full refunds to U.S. owners of recalled Toyota vehicles as part of consumer protection cases filed in 12 states could raise the legal stakes even higher for the car company.

In seeking the fine, the U.S. National Highway Transportation and Safety Administration said Toyota failed to notify the agency for four months about a defect in accelerator pedals that were “sticky” and “slow to return.”

Toyota’s records showed it had issued repair notices for the pedal problem in Canada and Europe in September, but did not take action in the U.S. market until January. Automakers are required to make notifications within five business days.

U.S. safety regulators have reviewed more than 120,000 pages of Toyota documents to determine whether it has met its legal obligations and have said additional fines are possible.

Toyota’s shares fell 31 cents to $79.06 on the New York Stock Exchange late Monday afternoon.

Additional reporting by John Crawley in Washington and David Bailey in Detroit; Editing by Maureen Bavdek, Richard Chang and Leslie Gevirtz

Our Standards:The Thomson Reuters Trust Principles.
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