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Toyota Pays Record Fine for Recall Delay

Fourth big penalty for Japanese maker for delaying safety campaign.

by on Dec.18, 2012

Lexus will pay a record fine for delaying the recall of nearly 150,000 RX models due to an unintended acceleration-related problem.

In a further blow to its well-honed image of quality, reliability and safety, Toyota has confirmed it will have to pay a record $17.35 million fine for delaying yet another recall related to unintended acceleration problems.

The news comes even as the Japanese giant heads towards the end of the year in a dubious race with rival Honda to see who will have the most vehicles recalled due to safety problems for all of 2012.

The latest fine marks the fourth time since 2010 that Toyota has had to shell out the maximum allowable penalty for delaying recalls.  Three years ago, fines levied by the National Highway Traffic Safety Administration totaled $48.8 million – but that covered three separate recalls in which Toyota failed to act in a timely manner on a known safety defect, as required by U.S. law.

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According to a five-page draft agreement uncovered by the Detroit News, Toyota now will not only have to pay $17.35 million for delaying the recall of 154,000 Lexus RX crossovers last June but it will also have to hold monthly meetings related to safety issues.  It will also have to make significant internal reforms.

That’s a direct slap in the face of Toyota Motor Co. President Akio Toyoda – who tearfully promised Congress he would take steps to improve his company’s response to safety issues during a 2010 hearing on Capitol Hill.  Among other things, the maker followed up then by appointing an executive specifically to oversee safety-related problems.

But the recall of Lexus RX 350 and RX 450h crossovers raised concerns that the new procedures had failed to achieve the desired results.

Toyota’s problems began in October 2009 when it was forced to order the first in a series of recall related to unintended acceleration – a situation where vehicles either accelerated without driver input or could not be brought to a halt while driving. The crisis began after a California Highway Patrol officer and several family members were killed when the floor mat in a Lexus they were driving jammed the accelerator pedal and their vehicle ran off the road and caught fire.

By early 2010, Toyota added a second recall related to unintended acceleration, this one covering sticky accelerator pedals.

But the maker’s problems grew worse when it ordered a series of recalls related to other safety issues, ranging from defective brakes on the popular Toyota Prius to excessive corrosion on the Sienna minivan that could lead to parts falling off the vehicle while driving.

Toyota recalled more vehicles than any other manufacturer in 2010 – though Honda topped the list a year later.  Both makers have recalled millions more vehicles this year.

In fact, Toyota announced the largest single global recall in its history this past October involving 7.5 million vehicles equipped with driver’s side window switches that can potentially short out and catch fire. A total of 2.5 million of those products were sold in the U.S.  A smaller recall involving the same issue was announced earlier this year.

A statement by Toyota tried to put a positive spin on the latest setback, Ray Tanguay, chief quality officer for Toyota North America declaring, “We continue to strengthen our data collection and evaluation process to ensure we are prepared to take swift action to meet customers’ needs.”

According to the executive, Toyota only agreed to the settlement “to avoid a time-consuming dispute.”

But it’s clear the maker will be consumed with efforts to step up its safety oversight. Among other things, Toyota will now have to hold monthly meetings on so-called “carpet entrapment” issues for at least six months. And U.S. regulators reserved the right to extend those meetings for an additional six months.

Despite its safety-related problems to date, there’s little evidence that Toyota’s sales have been hurt. Rebecca Lindland, of IHS Automotive, contends that “loyal owners” will continue to purchase the Japanese giant’s products, though she warns continuing problems could make it more difficult to win over “conquest” customers.

Working in Toyota’s favor, the maker has been topping most recent quality and reliability surveys, such as the J.D. Power Initial Quality Survey and Consumer Reports’ annual reliability study. However, officials with both Power and Consumer Reports caution that they do not take into account recall-related issues when compiling their data.

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