Toyota Agrees to $1.1 Billion Settlement

Toyota has agreed to pay $1.1 billion in the settlement of a lawsuit over complaints about unintended accelerations in its cars. (Photo by Scott Olson/Getty Images)

Toyota announced a $1.1 billion settlement Wednesday to resolve lawsuits alleging "unintended acceleration," instances that put motorists in danger when the throttles of their cars jammed open.

As part of the settlement of the U.S. District Court case that was seeking class-action status, Toyota will create a fund for additional retrofitting of up to 3.2 million Toyota and Lexus cars with technology to make them easier to stop in a panic situation. For models that can't be retrofitted, there will be cash payouts to owners. And those who sold their vehicles in late 2009 and all of 2010 will be eligible for compensation due to lowered resale value due to the issue.

A Toyota spokesman says the company feels good about the settlement for having shown that the vast bulk of unintended acceleration cases were due to floor mats that slid underneath accelerators and became trapped, not because of electronic defects in the cars' engine computers. A jammed floor mat won't necessarily make the car go faster, but it can make it hard to stop because it keeps moving even when a foot is off the accelerator.

"We felt we achieved our objective, to defend the safety of the product," says spokesman Mike Michels. That having been done, the settlement is "a business decision and we turn the page on a lot of this."

Toyota says it is setting aside $1.1 billion for its costs to settle the lawsuits. Steve Berman, who is co-lead counsel for plaintiffs in the cases consolidated in Orange County, Calif., said in a statement that he believes the value of the settlement is between $1.2 billion and $1.4 billion.

"After two years of intense work, including deposing hundreds of engineers, poring over thousands of documents and examining millions of lines of software code, we are pleased that Toyota has agreed to settlement that was both extraordinarily hard fought and is exceptionally far reaching," Berman says. The settlement is subject to approval expected Friday before U.S. District Court Judge James Seina.

The settlement comes more than three years after the fatal crash of a Lexus that killed an off-duty California Highway Patrol officer and his family near San Diego erupted into a full-blown scandal for the automaker. At first, Toyota said only that floor mats could become trapped under acceleration pedals, giving drivers the impression that their cars were trying to run away on them. Then, Toyota announced a series of worldwide recalls involving millions of cars, including some for potentially defective accelerator assemblies.

Toyota executives were called to congressional hearings about the issue. The National Highway Traffic Safety Administration launched an engineering investigation that was never able to show any electronic bugs were the cause of unintended acceleration. But the agency has stayed active with the issue. Last week, NHTSA levied a $17.35 million fine — the maximum currently allowed for a single violation — for waiting too long to report the issue that led to just one of the series of recalls, one involving 2010 Lexus RX 350 and RX 450h crossover SUVs.

To settle the unintended acceleration cases, Toyota agreed to:

• Install a brake-override system in non-hybrid vehicles that were subject to floor-mat entrapment recalls. The systems, which are now common in new Toyota and Lexus vehicles, cut power to the engine when they sense that the driver in trying to stop the vehicle as if in a panic, such as by repeatedly pushing the brake pedal. Toyota says its hybrids don't need the system.
• Put $250 million into a fund for former owners who sold their cars between Sept. 1, 2009 and Dec. 31, 2010 or leased them during the period to compensate them for reduced value of their vehicles due to publicity around issues of Toyota's unintended acceleration. The actual amount that will go to any individual owner wasn't immediately disclosed. It may become more clear, says Berman spokesman Mark Firmani, after Friday's hearing.
• Create a separate $250 million will be created to compensate owners of non-hybrid cars that can't be retrofitted with the brake-override system. Toyota spokesman Michels says cars without the system are still safe because the brake-override system is "not a prevention or cure" for floor mats that can become trapped under pedals.
• Establish a "customer care plan" for all 16 million affected Toyota customers to add another three to 10 years to the warranty period for parts that could be related to unintended acceleration.
• Pay $30 million to issue grants for study of auto safety and enhanced driver education.