Dec. 26 (Bloomberg) -- Toyota Motor Corp. said it will take a $1.1 billion write-down to settle claims that its vehicles lost value because of the carmaker’s recalls for unintended acceleration-related issues.
Under the settlement agreement, filed today in federal court in Santa Ana, California, Toyota 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, according to an e-mailed statement from the company.
Asia’s largest carmaker will also offer cash payments to eligible customers who sold or turned in their leased vehicles in 2009 or 2010, according to the statement. Toyota, based in Toyota City, Japan, willtake a one-time, $1.1 billion pretax charge against earnings to cover the estimated costs of the settlement, according to the statement. Plaintiffs’ lawyers said the accord is valued at $1.2 billion to $1.4 billion, according to a separate statement.
“This agreement marks a significant step forward for our company, one that will enable us to put more of our energy, time and resources into Toyota’s central focus: making the best vehicles we can for our customers and doing everything we can to meet their needs,” Christopher P. Reynolds, vice president and general counsel for Toyota’s U.S. sales arm, said in an e-mailed statement.
The accord announced today settles the economic-loss portion of the Toyota sudden-acceleration lawsuits. Lawsuits claiming personal injuries and deaths caused by such incidents remain pending, with the first federal trial set for February in Santa Ana.
The company, based in Toyota City, Japan, recalled more than 10 million vehicles for problems related to unintended acceleration in 2009 and 2010, starting with a September 2009 announcement that it was recalling 3.8 million Toyota and Lexus vehicles because of a defect that may cause floor mats to jam accelerator pedals. The company later recalled vehicles over defects involving the pedals themselves.
Toyota has paid $66.2 million in fines to the U.S. National Highway Traffic Safety Administration for how some of the recalls were conducted. The company last month agreed to pay $25.5 million to settle an investor lawsuit claiming Toyota’s alleged failure to disclose information on unintended acceleration problems caused the stock to plunge in 2010.
The recalls spurred the economic loss claims, filed as class, or group, actions on behalf of Toyota owners who contended the company drove down the value of their vehicles by failing to disclose or fix defects related to sudden acceleration. The economic loss cases were combined in a multi- district litigation before U.S. District Judge James V. Selna, who is also handling the federal personal injury and death suits.
Today’s settlement would resolve all economic loss claims before Selna, pending his approval. The resolution, filed in court today, asks Selna to certify the lawsuit as a class action for settlement purposes. Toyota didn’t admit to any defects in its vehicles or any wrongdoing in the settlement, according to today’s filing.
Lawyers for both sides are asking for immediate preliminary approval, Steve Berman, a lead plaintiffs’ attorney, said in an interview today. The lawyers will be seeking final approval in June, after which Toyota owners will get paid, Berman said.
The costs to the company will include $250 million in cash to former Toyota owners who sold their vehicles, $250 million for people who still own the vehicles, and as much as $200 million in attorneys’ fees, Berman said.
The settlement “covers any car that had an electronic throttle control system,” Berman said.
Toyota will install a brake override system in an estimated 3.25 million vehicles as part of the agreement. Eligible vehicles for brake-override systems are non-hybrids that were subject to floor-mat entrapment recalls, according to the settlement filed to the court.
Toyota’s $1.1 billion write-down also covers an agreement in principle to resolve a lawsuit brought by the district attorney of Orange County, California, against Toyota, Julie Hamp, a company spokesman, said today. The Orange County suit claimed violations of consumer protection laws through the sale of allegedly defective vehicles.
The write-down also includes an agreement to settle a multistate investigation by attorneys general in the U.S., she said.
The case is In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, 8:10-ml-02151, U.S. District Court, Central District of California (Santa Ana).