Toyota faces $16M fine, accused of hiding defect

WASHINGTON — Federal safety regulators said Monday that they intend to fine Toyota Motor $16.4 million — the largest ever penalty against an automaker — for failing to disclose problems with sticky accelerator pedals quickly enough.

The National Highway Traffic Safety Administration said Toyota knew in September that it had a problem with accelerator pedals that required fixing, but failed to recall 2.3 million vehicles until January — four months later.

In taking the step, federal authorities are sending the strongest signal yet that they believe the automaker deliberately concealed safety information from them.

"We now have proof that Toyota failed to live up to its legal obligations," Transportation Secretary Ray LaHood said. "Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families."

Auto manufacturers are legally obligated to notify NHTSA within five business days if they determine a defect exists. NHTSA said it learned after reviewing Toyota's records that it had known of the pedal defect since at least Sept. 29, 2009.

NHTSA outlined its findings in a five-page letter to Toyota late Monday and gave the company until April 19 to respond in writing. NHTSA said it will go to court to impose the fine if Toyota raises objections.

A Toyota spokeswoman, Cindy Knight, said in a statement that the

company had not yet received a letter from the agency about the fine.

"We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance," Knight said.

The $16.375 million penalty is the maximum NHTSA can levy under law. Congress increased the penalties in 2000. Previously, its largest fine was $1 million against General Motors in 2004 for failing to disclose a defect with windshield wipers in 600,000 vehicles for more than two years. Toyota could face more fines as the agency continues to investigate.

"We will continue to hold Toyota accountable for any additional violations we find in our ongoing investigation," NHTSA Administrator David Strickland said.

The fine against Toyota comes just six weeks after the NHTSA launched an investigation into the timeliness and scope of the automaker's three recent recalls. About 2.3 million vehicles were recalled in January for the sticky pedal defect. Toyota has separately recalled 5.4 million vehicles over issues with gas pedals becoming entangled with floor mats, with some covered by both.

Reviewing Toyota's records, NHTSA learned that the automaker issued repair procedures Sept. 29 to its distributors in 31 European countries and Canada to address complaints of sticky accelerator pedals and sudden acceleration. Documents show Toyota was aware that U.S. consumers were experiencing the same problems, the agency said.

NHTSA also obtained hundreds of e-mails from Toyota that support its conclusion Toyota knew of the issue last year.

The agency has received more than 3,000 complaints of runaway Toyota vehicles since 2000, alleging at least 51 deaths.

The penalty is a financial pittance for Toyota, which had revenue of $209 billion last year, but could add to its public relations woes. The company has endured congressional hearings and a torrent of bad publicity over the sudden acceleration problem.

Sid Shapiro, a law professor at Wake Forest University and vice president of the Center for Progressive Reform, a legal research organization, questioned whether the Toyota fine would be effective.

"It's good news that NHTSA is being an aggressive regulator, but you have to have doubts whether a $16 million fine is going to have a deterrent effect on automobile companies that are worth billions of dollars," Shapiro said.

But Mike Rozembajgier, director of recalls for Expert- RECALL, a consulting firm that helps manufacturers conduct product recalls, said the amount of the fine might be less important than the reasoning behind it.

Toyota reported strong March sales, helped by the generous incentives it introduced after the recalls. But Rozembajgier said its customers could be less supportive should it turn out Toyota tried to hide the defects, as the government contends.

"If it was done knowingly," he said, "then it certainly becomes a game-changer for consumers."

NHTSA, which came under harsh scrutiny for conducting eight investigations into sudden acceleration issues at Toyota since 2000 and doing little, is now taking a far more aggressive stance with automakers.

This article was written by David Shepardson of The Detroit News

http://www.mercurynews.com/breaking-news/ci_14826155?nclick_check=1

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