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

By Peter Whoriskey and Kimberly Kindy
Washington Post Staff Writer
Tuesday, April 6, 2010; A01

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.

The company was aware at the time that U.S. consumers were also experiencing those problems, NHTSA said. It was not until January that approximately 2.3 million vehicles in the United States were recalled for the sticky pedal defect.

"The Department of Transportation is exercising a very stern hand here," said safety advocate and former NHTSA administrator Joan Claybrook.

In the largest previous such fine, General Motors paid a civil penalty of $1 million to settle charges that it failed to conduct a timely recall to correct a safety defect in 2002 and 2003 models.

By reaching for the highest allowed fine, they said, NHTSA is in part reacting to criticism that it had failed in its watchdog role over the auto industry. During an internal company presentation in 2007, Toyota officials in Washington bragged of saving the company $100 million by holding off an NHTSA defect finding related to unintended acceleration.

"Toyota embarrassed NHTSA," said Clarence Ditlow, director of the Center for Auto Safety. Officials are "looking for every opportunity to enforce the law and tell [Toyota] we will never give you another break again, and at the same time send a message to other automakers -- don't you do it."

Meanwhile, the agency continues to investigate why so many drivers have complained about unintended acceleration in Toyotas. The company has acknowledged that sticky pedals, and a tendency for floor mats to entrap accelerators, have caused some of the reported incidents. But the company's critics say flaws in the car electronics may be at the root of the problem.

Last week, the nation's auto-safety regulators announced they had tapped nine experts from NASA to answer questions involving software, hardware and other electronics issues. A separate panel from the National Academy of Sciences is working on a broader 15-month review of vehicle electronics.

"As far as the fine is considered, I'm 100 percent for that," said Frank Visconi, whose Tacoma truck flipped after it accelerated unintentionally in June 2007. "I think it's been documented for a long time that Toyota has not been forthright with the government. . . . I think it will get their attention."

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