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Toyota Pays Millions in Settlements, but Continues to Enjoy Increasing Sales

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In December 2012, Toyota agreed to a settlement worth over $1 billion to resolve hundreds of lawsuits claiming economic losses from Toyota owners whose businesses suffered after the car company recalled millions of vehicles for acceleration problems.

Since then, the company has worked to resolve many other cases as well. Most recently, they agreed to a $16 million settlement with Orange County. The county’s District Attorney’s office claimed Toyota knew its cars had defects, and continued to sell them anyway.

Toyota Initially Denies Reports of Problems

It started in 2009-2010, when owners of Toyota cars and trucks started complaining about the vehicles suddenly accelerating out of control, seemingly on their own, and causing accidents, injuries, and sometimes, even death. At first, Toyota maintained that their vehicles were not to blame. Instead, they suggested floor mats were trapping the gas pedal, or that driver error was causing the issues.

In September 2009, the company recalled 3.8 million Toyota and Lexus vehicles because of a defect that could cause floor mats to jam accelerator pedals. But the reports of accidents kept coming in.

Next, Toyota announced that it would modify the vehicles to add a brake override system allowing drivers to cut power to the accelerator, but they still insisted their vehicles were not defective. Under increased pressure from the media and customers, the company eventually recalled and suspended sales of 10 million vehicles—eight car models—due to "sticky" gas pedals that were said to potentially cause cars to race ahead out of control.

Toyota Starts Negotiating

Despite the recalls, Toyota dealership owners felt the company did not react appropriately to protect their businesses, and drove down the value of the vehicles by failing to fix the issues and protect the safety of the public.

In December 2012, Toyota agreed to a $1.1 billion settlement to cover economic losses of Toyota dealerships in a federal multidistrict litigation held in Santa Ana, California. The company paid $66.2 million in fines to the U.S. National Highway Traffic Safety Administration over how some of the recalls were conducted—the company was accused of failing to initiate recalls in a timely manner—and paid $25.5 million in November 2012 to settle an investor lawsuit.

In February 2013, the company agreed to a $29 million settlement with 29 states as part of a lawsuit accusing the company of late notification to customers regarding the acceleration problems. This lawsuit blamed Toyota’s defective electronic throttle-control system rather than floor mats or sticky accelerator pedals for the safety problems.

Company Continues to Pull In Earnings

In the end, Toyota recalled about 20 million vehicles globally, surpassing all other vehicle recalls. Still, sales in the domestic market surged 35 percent in 2012 and posted a 22.2 percent rise in earnings per share in the third quarter ending December 31, 2012.