Toyota in $3.4 Billion Corrosion Deal
November 13 2016 - 8:50PM
Dow Jones News
Toyota Motor Corp. has agreed to pay up to about $3.4 billion to
settle claims that certain of its trucks and sport-utility vehicles
lacked proper rust protection, leading to premature corrosion of
vehicle frames.
The agreement is a substantial financial setback at a time when
the Japanese auto giant's record-breaking profit streak has slowed
in recent quarters as a strong yen dents its performance. The
company also is part of a broader group of auto makers facing
plateauing retail sales in the profitable U.S. market.
The deal, filed in U.S. District Court in Los Angeles this week,
settles litigation in two states over problems with Toyota Tacoma
trucks from model years 2005 to 2010, Tundras from 2007 to 2008 and
Sequoias from 2005 to 2008.
Around 1.5 million vehicles in the U.S. are covered by the
settlement, court filings show.
The agreement represents a significant settlement for the auto
industry and follows several costly agreements auto makers have
forged in recent years to address quality, safety or emissions
issues in vehicles.
General Motors Co. recalled millions of vehicles in 2014 and
spent billions of dollars to address ignition-switch problems
linked to 124 deaths; Volkswagen AG forged a $14.7 billion deal
more recently to settle with U.S. drivers of diesel-powered cars
affected by an emissions-cheating scheme.
Several auto makers, including Toyota, continue to work with
Takata Corp. to repair tens of millions of air bags in the largest
automotive safety campaign in history.
"We want our customers to have a great ownership experience, so
we are pleased to resolve this litigation in a way that benefits
them and demonstrates that we stand behind the quality and
reliability of our vehicles," Toyota said.
The settlement was reported earlier by The Detroit News.
Toyota and plaintiffs' lawyers said the deal, which is still
subject to court approval, reflects months of negotiation. As part
of the agreement, Toyota doesn't admit to any wrongdoing.
Once approved, consumers will be entitled to an inspection of
their vehicles and ultimately replacement of its frame if the car
is found to have the faulty rust protection. Car owners who already
have replaced their frames will also be reimbursed.
Court documents peg the cost of inspection to Toyota under the
accord at $90 a vehicle and to replace each frame at $15,000.
The deal also sets aside up to $9.9 million for attorneys' fees
and expenses. Toyota said it would pay between $1.75 million and
$2.5 million to notify potential affected consumers by mail and
through publication notices and internet campaigns.
Attorneys for consumers called the settlement "the result of
hard-fought litigation" and a "complete and total success" for
affected drivers. Toyota said in its own filing that while it
"disputes and contests the allegations in these class actions
lawsuits," the deal "represents a reasonable and fair way to end
the controversy."
The litigation dates back to 2014, when consumers filed a
lawsuit in Arkansas that was later combined with litigation in
California.
John D. Stoll contributed to this article
Write to Sara Randazzo at sara.randazzo@wsj.com
(END) Dow Jones Newswires
November 13, 2016 20:35 ET (01:35 GMT)
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