Toyota Hit With $1.2B Recall Fine; How Will It Affect Shoppers, Owners?

March 21, 2014
2010 Lexus ES 350

2010 Lexus ES 350

For a whopping $1.2 billion, Toyota Motor Co. agreed earlier this week to settle a federal criminal probe concerning its statements during the unintended-acceleration-related recalls of Toyota and Lexus vehicles four years ago.

The penalty is the largest one ever imposed on an automaker. But as a number of financial outlets have reported, it's unlikely to affect Toyota's operations—including vehicles and pricing—in any way.

With Toyota's balance sheet showing nearly $60 billion in reserves—far more than what Ford, GM, or VW have on hand—the automaker isn't at all cash-starved.

U.S. Attorney General Eric Holder emphasized the punitive nature of the settlement. Holder accused Toyota of a cover-up, and said that it had treated a public safety issue "as if it were a public relations problem.”

“Specifically, we have taken a number of steps that have enabled us to enhance quality control, respond more quickly to customer concerns, strengthen regional autonomy and speed decision-making,” assured chief legal officer Christopher Reynolds earlier this week, in a release.

Toyota has already paid out millions in civil fines and settlements to owners of affected vehicles, which have never been determined to have any defects in the electronic “drive-by-wire” throttle, as accused at an earlier point, but rather a mechanical issue with accelerator pedals that could be trapped by floor mats.

The recall estimate already cost the automaker in the vicinity of $2 billion—and that was before any such settlements.

Part of that went to a different $1.2 billion class-action settlement in 2012 that had reimbursed owners, in part, for a supposed loss in resale value—now termed in the settlement as a “period of diminished value of the Subject Vehicles.” Since then, various valuation companies have found no long-term loss in the value of affected Lexus and Toyota vehicles, however.

Meanwhile, the Lexus ES 350, one of the highest-profile cases affected by the issue and the ensuing public-relations nightmare, continues to sell well; it and the Lexus brand have been named best resale values by Kelley Blue Bookf or several years in a row.


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