Asia’s biggest automaker, will take a $1.1 billion charge to settle U.S. consumer claims that the value of their vehicles diminished because of recalls related to unintended acceleration.
The settlement, pending approval from a judge in federal court in Santa Ana, California, will cover costs such as cash payments to customers, Toyota said in a statement yesterday. The deal is valued at $1.2 billion to $1.4 billion, a record in the U.S. in terms of financial scale and number of vehicles, according to Seattle-based law firm Hagens Berman, which represented plaintiffs.
The accord highlights how more than three years after Toyota began recalling a record number of vehicles — totaling more than 10 million units from 2009 to 2010 — the maker of the Camry is still dealing with the aftermath of problems related to unintended acceleration. Lawsuits claiming personal injuries and deaths caused by such incidents remain pending, with the first federal trial set for February in Santa Ana.
“I’ve never seen a company made to pay this much,” said Takeshi Miyao, a Tokyo-based analyst at industry researcher Carnorama Japan. “There are still more cases to come though, and the amount will snowball into a bigger sum. I don’t expect it to be settled at $1.1 billion.”
The Toyota City, Japan-based car maker rose 3 percent to 3,945 yen at 2:16 p.m. in Tokyo, headed for its highest close since January 2010, after the company said in a separate statement yesterday that it expects total vehicle sales to climb 22 percent to a record 9.7 million units this year and climb about 2 percent next year. Nomura Holdings Inc. (8604) raised its target price on the stock 19 percent to 4,800 yen, citing Toyota’s earnings growth prospects.
The one-time charge will be reflected in earnings for the quarter ending Dec. 31, Toyota said. The writedown is separate from the $2 billion in total costs related to the recalls that Toyota had projected in 2010, said Keisuke Kirimoto, a Tokyo- based spokesman.
Toyota, which didn’t admit to any defects in its vehicles or any wrongdoing in the settlement, said it will begin a customer-support program providing coverage for certain vehicle components, and will retrofit additional non-hybrid vehicle models subject to a floor-mat recall with a free brake-override system. The car maker will also offer cash payments to eligible customers who sold or turned in their leased vehicles in 2009 or 2010…
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