April 19, 2010 / 2:45 AM / 10 years ago

Toyota to pay $16.4 million fine, recall Lexus SUV

DETROIT (Reuters) - Toyota Motor Corp has agreed to pay a record $16.4 million fine to U.S. safety regulators to settle a complaint that the company delayed a recall over defective accelerator pedals, but denied violating U.S. regulations.

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

The automaker on Monday also recalled the 2010 Lexus GX 460, a luxury SUV that influential magazine Consumer Reports warned last week was a “safety risk” because of a potential handling problems in turns.

Toyota said its own testing confirmed the problem and said it would fix the electronic stability control system’s software in about 9,400 Lexus GX 460 vehicles sold in the U.S. market.

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 and not provided any further updates. Most analysts believe the costs will be significantly higher.

Delays alleged by U.S. regulators in a January recall of 2.3 million vehicles due to defective accelerator pedals led to the record fine.

Toyota said it had made a “good faith” effort to handle safety problems, but decided to pay the penalty — the maximum allowed by U.S. law and the largest the regulator has ever sought — “to avoid a protracted dispute and possible litigation.

“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 also provide further ammunition to plaintiff lawyers looking to bolster legal claims against Toyota, which has recalled more than 8 million vehicles worldwide for accelerator pedal defects and ill-fitting floormats that could cause unintended acceleration.

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.

Toyota faces numerous lawsuits alleging consumer fraud and personal injuries over unintended acceleration in its vehicles. The company’s handling of safety issues is also under investigation by the U.S. Securities and Exchange Commission and a grand jury in New York.

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

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.

The fine related specifically to the U.S. National Highway Transportation and Safety Administration’s allegations that it failed to notify the agency for four months about a defect in accelerator pedals that were “sticky” and “slow to return.”

The U.S. regulator said in proposing the fine that Toyota’s own records showed that 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 tell U.S. safety regulators within five days if they determine a safety defect exists.

U.S. safety regulators continue to review Toyota’s statements and more than 120,000 pages of Toyota documents to determine whether the automaker has complied with all its legal obligations and have said that 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

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