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Toyota reaches deal with recall owners

Dec 27 2012 08:45 AFP
Die nuwe Toyota Corolla Sprinter is hier.

The Toyota Corolla Sprinter. (Die nuwe Toyota Corolla Sprinter is hier.)

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Chicago - Toyota has agreed to pay about $1.1bn to settle a class action lawsuit launched by US vehicle owners affected by a series of mass recalls, the Japanese automaker said on Wednesday.

Toyota did not accept any blame but agreed to compensate owners who argued that the value of about 16.3 million vehicles took a hit from dozens of deadly accidents allegedly caused by Toyota vehicles speeding out of control in 2009.

The deal will cover the cost of installing a free brake override system in about 2.7 million vehicles.

It will also provide cash payments to those who sold their vehicles in the wake of the recalls or who own vehicles ineligible for the override system.

Once lauded for its safety standards, Toyota was forced into damage control mode in recent years after recalling millions of vehicles over a series of serious defects.

Earlier this year it added two models to the controversial 2009-2010 recalls launched after it was discovered that floor mats were trapping the accelerator pedals.

Toyota's mishandling of the initial problem and other reports of sudden, unintended acceleration led to a US congressional probe, more than $50m in fines from US regulators and public apologies by its chief.

Just two weeks ago, the company agreed to pay a record $17.35m fine for failing to promptly notify US authorities that the floor mats could also be trapped under the accelerators of 2010 Lexus models.

And last month Toyota agreed to pay $25.5m to settle claims from shareholders who lost money after the Japanese automaker's stock price plummeted in the wake of the recalls.

Toyota has worked hard to regain its reputation for safety, while at the same time fighting off the impact of the economic crisis, a strong yen and the devastating 2011 quake-tsunami disaster.

The settlement helps Toyota avoid a lengthy and risky court battle with angry owners who also argued that Toyota's technology - not the trapped floormats - were behind the deadly instances of sudden, unintended acceleration.

"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," Christopher Reynolds, Toyota Motor North America's chief legal officer, said in a 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."

Earlier Wednesday Toyota forecast a 22% jump in worldwide sales this year to 9.7 million units, driven by surging demand that may help it regain the top spot in the global auto market.

Those figures could put Toyota ahead of General Motors and Volkswagen as the world's biggest automaker, a title it held between 2008 and 2010 but lost last year after a slump in sales and production.

Japan's biggest automaker also said it expects to sell about 9.91 million vehicles in 2013, up two percent on-year.

"Toyota's outstanding performance this year is a proof that consumer sentiment for the company's products has already recovered to a degree as if nothing ever happened," said Jesse Toprak, an analyst with automotive site TrueCar.com.

The huge payout will "sting" Toyota, but it will also allow the Japanese giant to "leave these troubles behind and move forward in the new year," said Michelle Krebs, an analyst with automotive site Edmunds.com.

The settlement, which was filed in a California federal court Wednesday, must still be approved by a judge.

It includes $250m for owners who've sold their vehicles, $250m for owners whose vehicles are ineligible for the brake override system and $30m for safety research.

Toyota will also provide free repairs for certain components linked to the recall.

Toyota said it would take a $1.1bn charge to cover the estimated costs of the settlement and two other cases.

A lead attorney for the plaintiffs told the Wall Street Journal that Wednesday's deal could end up costing Toyota as much as $1.4bn.

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toyota  |  car recalls
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