Toyota faces $16.4 million U.S. fine for waiting to warn of defect

Toyota says it hasn't been notified yet, but the automaker says it knows the U.S. government is proposing a record $16.4 million fine for failing to quickly alert regulators about safety problems.
By Peter Whoriskey and Kimberly Kindy
Washington Post Staff Writer
Tuesday, April 6, 2010

Federal regulators are seeking to fine Toyota $16.4 million for waiting four months or more before notifying safety officials about vehicles with a "sticky pedal" defect.

If it stands, the sanction would represent the largest financial penalty imposed by the U.S. government on an automaker. The fine could rise if the government's ongoing investigation into runaway Toyotas turns up violations related to other defects, officials said.

Toyota has two weeks to contest or accept the proposed penalty.

Although the cause of unintended acceleration in Toyotas is a matter of debate, the automaker and safety regulators agree that sticky pedals were behind at least some of the incidents. In announcing the fine on Monday, regulators said they are still reviewing 70,000 pages of Toyota documents that they have received during the course of the probe.

"We now have proof that Toyota failed to live up to its legal obligations," Transportation Secretary Ray LaHood said in a statement. "Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families."

If Toyota contests the sanction, the matter would head to court. A spokesman said Monday evening that the company had yet to make a decision because it hadn't received formal notification.

"We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance," Toyota said in a statement.

Despite the stern rhetoric from regulators, the proposed fine, capped at $16.375 million, is relatively small for an automaker that reported revenue of more than $200 billion last year, consumer advocates said.

"Well, I think that is just a drop in the bucket," said Rhonda Smith, a retired Tennessee social worker whose 2007 Lexus ES 350 sped up to 100 mph during a wild, six-mile ride in 2006. (Lexus is Toyota's luxury division.) "To get their attention, it would need to be hundreds of millions of dollars and they would need to be forced to pay restitution to every family member who loses someone in a vehicle of theirs because it has acceleration problems."

The company could face far heftier penalties in civil lawsuits. If each owner of the roughly 6 million Toyota vehicles that have been recalled were awarded $500, it would cost Toyota about $3 billion in damages, according to Tim Howard, a law professor at Northeastern University who is helping to coordinate class-action lawsuits.

Under U.S. law, automakers must notify the National Highway Traffic Safety Administration within five days of identifying a safety defect.

Toyota issued its recall for sticky pedals in January. But according to NHTSA's review of company documents, the automaker knew of the problem at least as early as Sept. 29, when it issued repair instructions to distributors in 31 European countries and Canada to address complaints about sticky accelerator pedals and sudden increases in vehicle acceleration.

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