Toyota Pays Maximum $32 Million Fine For Two Safety Defect Recalls

By JOSEPH RHEE

Dec. 21, 2010

Toyota has been hit with a record $32.425 million in new civil penalties - the maximum allowed under federal law -- because the automaker failed to properly report safety defects to federal regulators.

The fines were levied after two separate Department of Transportation (DOT) investigations into Toyota’s handling of recall relating to sudden acceleration and steering issues. The steering rod probe was spurred in part by an ABC News report on a Toyota truck crash that killed an Idaho teenager.

"Safety is our top priority and we take our responsibility to protect consumers seriously," said U.S. Transportation Secretary Ray LaHood in a statement. "I am pleased that Toyota agreed to pay the maximum possible penalty and I expect Toyota to work cooperatively in the future to ensure consumers' safety."

In one of the cases, Toyota agreed to pay $16.375 million after the National Highway Traffic Safety Administration (NHTSA) found that Toyota was late in notifying the federal government that accelerator pedals in its vehicles could became entrapped by floor mats and cause vehicles to accelerate out of control.

Toyota initially recalled 55,000 floor mats because of sudden acceleration concerns in September of 2007. 

However, it wasn't until October of 2009, in the wake of a highly publicized fatal crash in Santee, California, that Toyota conducted a more comprehensive recall involving almost four million vehicles. Federal law requires automakers to notify regulators of safety defects within five days.

In the other announced case, Toyota agreed to pay a $16.050 million fine over allegations that it improperly delayed a recall of almost one million trucks and SUVs over defective steering rods. The National Highway Traffic Safety Administration (NHTSA) decided to conduct its own inquiry this May, reviewing new information suggesting that Toyota knew of complaints over breaking steering rods in the U.S. prior to its announced recall in September of 2005.

The new cases emerged during a lawsuit filed against Toyota by the family of 18-year-old Levi Stewart of Fairfield, Idaho, who was killed when his Toyota truck rolled over. Stewart's family blamed the crash on a defective steering rod and says the accident could have been prevented if Toyota had issued the recall in a timely manner.

During discovery in the case, Toyota turned over 40 previously undisclosed cases where American owners had complained directly to Toyota about steering rod problems before October 2004, when Toyota issued a recall in Japan of 330,000 vehicles to replace the steering relay rods, which were prone to breaking under stress. NHTSA did not learn of the cases until an ABC News investigation earlier this year.

At the time of the Japanese steering rod recall, a Toyota official in Washington, D.C., told NHTSA that a recall in the U.S. was unnecessary because it had no reports of similar problems in this country, and that driving conditions were different in Japan. However, in a deposition for the Stewart court case, the official said under oath that company executives in Japan kept the U.S. complaint information from him.

Toyota did not issue a steering rod recall in the U.S. until almost a year after the recall in Japan, when it acknowledged that the rods were defective. The U.S. recall affected older models of the Toyota T100 pickup truck (model years 1993-98), Toyota 4Runner (1989-95) and the Toyota Truck (1989-95).

Levi Stewart's accident took place in 2007 on a country road outside Fairfield, Idaho. Levi's father Michael was one of the volunteer firemen who responded to the scene.

"When we got there, the devastation was just more than you could handle," said Michael Stewart.

Three months after Levi's death, a long-delayed recall notice from Toyota arrived in the mail at the Stewart home. In the worst case, the notice said, the steering relay rod might fracture, causing a loss of vehicle steering control and thus increasing the possibility of a crash.

"That immediately explained how the wreck happened," said Michael Stewart. "I was just shocked. How could they wait so long to send out a recall on something so important?"

"Automakers are required to report any safety defects to NHTSA swiftly, and we expect them to do so," said NHTSA Administrator David Strickland. "NHTSA acknowledges Toyota's efforts to make improvements to its safety culture, and our agency will continue to hold all automakers accountable for defects to protect consumers' safety."

In a statement released yesterday, Toyota said it agreed to pay the fines "without admitting to any violation of its obligations under the U.S. Safety Act", and that recall decisions are no longer being made solely by officials in Japan.

"As we have demonstrated in recent months, our North American operations now have a greater voice in making safety decisions, and we are taking appropriate action whenever any issues emerge," said Steve St. Angelo, Toyota's Chief Quality Officer for North America. "These agreements are an opportunity to turn the page to an even more constructive relationship with NHTSA and focus even more on listening to our customers and meeting their high expectations for safe and reliable vehicles," said St. Angelo.

However, Toyota has not yet closed the door on the steering rod relay issue. This July, Toyota confirmed that it is the subject of a criminal investigation by a federal grand jury in New York, which has subpoenaed documents about possible steering rod defects.

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Toyota spokeswoman Celeste Migliore said a subpoena was issued on June 29 for documents "related to defective, broken and/or fractured steering relay rods." "[Toyota Motor Corp.] and its subsidiaries intend to cooperate with the investigation," said Migliore.