Toyota to spend $1.1 billion on unintended acceleration claims

Toyota Motor Corp. is setting aside $1.1 billion to settle various U.S. lawsuits and other claims stemming from reports of unintended acceleration that plagued the automaker in 2009-2010.

The company has agreed to install new braking override systems in certain vehicles and reimburse owners who suffered economic losses because of the problems, Toyota said in a statement released Dec. 26. Up to 16 million vehicles are covered by the settlement, and will be given 3- to 10-year warranties for parts related to unintended acceleration, a statement released by the plaintiffs' lawyers said.

Plaintiffs' lawyers estimated 3.25 million vehicles would be eligible for new brake-override devices.

Toyota, in the settlement of a key piece of class-action litigation pending in U.S. District Court in California, made no admission of fault for the acceleration problems, according to The Wall Street Journal, which reported the agreement.

The settlements largely bring to an end the consumer fallout from Toyota's unintended acceleration cases, which beset the automaker for the better part of two years while it grappled with the U.S. recession.

"Toyota wants to put its unintended acceleration recalls behind once and for all and as costly as it might be, this settlement will allow them to remove most of the lingering financial uncertainty," said Jesse Toprak, a senior analyst with TrueCar.com.

The plaintiffs' lawyers say the settlement--among the largest ever in the auto industry--could be valued at $1.2 billion to $1.4 billion. U.S. District Judge James Selna, the federal judge handling the main piece of litigation in California, is expected to review the settlement on Friday.

Lawsuits claiming personal injuries and deaths caused by such incidents remain pending, with the first federal trial set for February in Santa Ana, Calif., Bloomberg reported.

Toyota has also been fined more than $60 million by the National Highway Traffic Safety Administration for failing to inform U.S. safety regulators in a timely manner of internal information about unintended acceleration.

The company has blamed many of the cases on driver error or the misplacement or misuse of floor mats.

Toyota's statement

"This agreement marks a significant step forward for our company, one that will enable us to put more of our energy, time and resources into Toyota's central focus: making the best vehicles we can for our customers and doing everything we can to meet their needs," Christopher Reynolds, Toyota's top North American legal officer, said in a statement.

"In keeping with our core principles, we have structured this agreement in ways that work to put our customers first and demonstrate that they can count on Toyota to stand behind our vehicles."

NHTSA and NASA engineers investigated the incidents but found no electronic defects in Toyota vehicles.

"This was a difficult decision--especially since reliable scientific evidence and multiple independent evaluations have confirmed the safety of Toyota's electronic throttle control systems," Reynolds said in the statement. "However, we concluded that turning the page on this legacy legal issue through the positive steps we are taking is in the best interests of the company, our employees, our dealers and, most of all, our customers."

Reynolds, in a June interview with Automotive News, mapped out some of Toyota's defense strategy. He said potential trials would call into question Toyota's reputation for engineering and vehicle quality: "I'm not exactly in the position to compromise with anybody over that issue...We're just not going to do it."

Toyota said it will offer cash payments to "eligible customers who sold or turned-in their leased vehicles in a period during 2009-2010," as well as other customers, including those who won't receive the new braking system installation.

The settlement also includes $30 million to establish more driver education programs and pay for more research into advanced safety technologies.

Terms of the settlement 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.

The plaintiffs' attorneys are slated to receive up to $200 million in fees and $27 million in costs, according to court documents.

"After two years of intense work, including deposing hundreds of engineers, pouring over thousands of documents and examining millions of lines of software code, we are pleased that Toyota has agreed to a settlement that was both extraordinarily hard-fought and is exceptionally far-reaching," Steve Berman, a lead counsel for the plaintiffs, said in a statement.

"From the very start, this was a challenging case, Berman said. "We brought in automotive experts, physicists and some of the world's leading theoreticians in electrical engineering to help us understand what happened to drivers experiencing sudden acceleration. We are extraordinarily proud of how we were able to represent the interests of Toyota owners, and believe this settlement is both comprehensive in its scope and fair in compensation."

Total costs

Toyota said the $1.1 billion pre-tax charge would also be used for a possible settlement of civil litigation with Orange County, Calif., and a group of state Attorneys General.

The automaker's statement didn't disclose the total costs of the unintended acceleration problems.

But those costs ultimately could top $3 billion, the Journal said. In 2010, Toyota released a preliminary estimate saying it could incur global liabilities of $2 billion stemming from the costs of recalls and lost sales, the newspaper said. But that figure didn't include the new settlement or other government fines and related costs.

The automaker set up a web site, www.toyotaelsettlement.com, to provide further information on the settlement.

By Philip Nussel and David PhillipsAutomotive News