Toyota Motor Corp. agreed Monday to pay a record $16.4 million fine for failing to properly notify U.S. authorities about a dangerous accelerator pedal defect, but denied allegations it broke the law.
Transportation Secretary Ray LaHood, announcing the largest-ever penalty paid by an automaker to the U.S. government, said that "by failing to report known safety problems as it is required to do under the law, Toyota put consumers at risk."
"I am pleased that Toyota has accepted responsibility for violating its legal obligations to report any defects promptly," LaHood said, noting that the U.S. government was continuing to investigate "whether the company has lived up to all its disclosure obligations."
Toyota said it agreed to the penalty "to avoid a protracted dispute and possible litigation" but denied the government's allegation that it violated the law.
"We believe we made a good faith effort to investigate this condition and develop an appropriate countermeasure. We have acknowledged that we could have done a better job of sharing relevant information within our global operations and outside the company, but we did not try to hide a defect to avoid dealing with a safety problem," Toyota said.
The penalty is connected to a January recall of 2.3 million vehicles with sticking accelerator pedals. The government says Toyota knew about the problem in late September and failed to report the potential safety defect within five business days, as required by law.
The fine does not free Toyota from potential civil and criminal penalties. The Japanese auto company still faces dozens of personal injury and wrongful death lawsuits in federal courts and federal prosecutors and the Securities and Exchange Commission are conducting investigations related to the recalls.
The 4-page legal agreement says Toyota denies it violated federal law and says that it will pay the civil penalty "without (the National Highway Traffic Safety Administration) making any formal findings with respect to Toyota's violations" of the law.
The penalty, the most the government could seek, is largely symbolic, given Toyota's strong balance sheet. The company had cash assets of $23.6 billion as of Dec. 31 and Toyota has said it expects to post a net profit of $885 million in the fiscal year ending March 31.
From the government's viewpoint, the agreement to pay the full fine constituted an acceptance of responsibility for hiding the safety defect in violation of the law. The previous record fine was $1 million paid by General Motors in 2004 for responding too slowly on a recall of nearly 600,000 vehicles over windshield wiper failure.
Toyota announced it would recall 2.3 million vehicles in January to address sticking pedals on popular vehicles such as the Camry and Corolla. The Japanese automaker has recalled more than 8 million vehicles worldwide because of acceleration problems in multiple models and braking issues in the Prius hybrid.
The fine was based upon timelines provided by Toyota that showed it had known about the sticky pedal defect at least since Sept. 29, 2009, when it issued repair procedures to distributors in 31 European countries to address complaints of sticking pedals, sudden increases in engine RPM and unexpected vehicle acceleration.
The documents also indicated that Toyota knew that owners in the U.S. had experienced the same problems.
The Japanese automaker has been weighing its options since the fine was announced in early April but analysts expected it to pay the penalty.
"When you look at the toll it's taken on Toyota's reputation, when you look at the number of vehicles involved, when you look at the hardship it's placed on Toyota's customer base, it's only right for Toyota to take this fine," said Dennis Virag, president of Automotive Consulting Group based in Ann Arbor, Mich.
The penalty is the largest the government can assess under law. Without the cap, government lawyers said Toyota could have faced fines of $13.8 billion, or $6,000 for each of 2.3 million vehicles that were sold with defective pedals.
Transportation officials have not ruled out additional fines. The department is reviewing whether Toyota delayed for six weeks the late January recall of the 2009-2010 Venza in the United States to address floor mats that could entrap the accelerator pedal after making a similar recall in Canada.
Toyota recalled the Venza in Canada in December and reported to the U.S. government on Dec. 16 that the floor mats could move forward and interfere with the pedal. Toyota told U.S. authorities at the time that the floor mats in question were not imported into the U.S. but the Venza was added to the floor mat recall in late January.