Video: Toyota faces record fine

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    >> york studios. ron , thanks.

    >>> the transportation department announced today it is hitting toyota with a fine for failing to report accelerator problems to safety officials in a timely manner. they are hitting the company for the maximum amount allowable. our report tonight from phil lebeau.

    >> reporter: six months after toyota first learned of a problem with sticky gas pedals the japanese auto maker is facing a fine for not moving fast enough to notify authorities of the problem. in fining toyota $16.4 million, secretary of transportation ray lahood says toyota failed to live up to its legal obligations. worst yet, they knowingly hit a dangerous defect for months from u.s. officials. toyota responded to the fine saying 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 overall commitment to quality assurance .

    >> it is a message not only to toyota but all auto companies that safety is first and they're going to have to obey the law.

    >> reporter: the law requires all automakers to tell the department of transportation within five business days if they find a defect. according to the d.o.t. toyota has known of a defect with sticky gas pedals since at least september 29th but nearly four months passed before toyota recalled 2.3 million vehicles with faulty pedals. a week later toyota said it would fix the problem by modifying the pedals. since then 1.2 million have been repaired. toyota can afford to pay a penalty of more than $16 million, this fine will be costlier in terms of the company's efforts to rebuild consumer trust. toyota could face more fines from the federal government as the department of transportation continues to investigate how the company handled three recent recalls including this one for sticky gas pedals. brian?

    >> phil lebeau, thanks for that.

By
updated 4/5/2010 7:54:54 PM ET 2010-04-05T23:54:54

The U.S. government accused Toyota of hiding a "dangerous defect" and proposed a record $16.4 million fine on Monday for failing to quickly alert regulators to safety problems in gas pedals on popular models such as the Camry and Corolla.

The proposed fine, announced Monday by Transportation Secretary Ray LaHood, is the most the government could levy for the sticking gas pedals that have led Toyota to recall millions of vehicles. There could be further penalties under continuing federal investigations. The Japanese automaker faces private lawsuits seeking many millions more.

Toyota Motor Corp. has recalled more than 6 million vehicles in the U.S., and more than 8 million worldwide, because of acceleration problems in multiple models and braking issues in the Prius hybrid.

Documents obtained from the automaker show that Toyota knew of the problem with the sticking gas pedals in late September but did not issue a recall until late January, LaHood said. The sticking pedals involved 2.3 million vehicles.

"We now have proof that Toyota failed to live up to its legal obligations," LaHood said in a statement. "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."

For those reasons, LaHood said, the government is seeking a fine of $16.375 million, the maximum penalty possible. That dwarfs the previous record: In 2004, General Motors paid a $1 million fine for responding too slowly on a recall of nearly 600,000 vehicles over windshield wiper failure.

How Toyota decides to respond to the fines could pose a dilemma for the automaker. The company faces 138 potential class-action lawsuits over falling vehicle values and nearly 100 personal injury and wrongful death cases in federal courts nationwide. If Toyota pays the fines, the admission could hurt it in courtrooms. But battling the government over the penalties could undermine the automaker's attempts to move on from the recalls.

"It may be easier to pay it than to let this keep dragging on and drawing more attention to themselves," said Jessica Caldwell, a senior analyst with auto research site Edmunds.com.

Toyota did not say whether it would pay the fine. The automaker has two weeks to accept or contest the penalty.

"While we have not yet received their letter, we understand that NHTSA has taken a position on this recall," the company said in a statement, a reference to the National Highway Transportation Safety Administration. "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."

The company noted that it has appointed a new chief quality officer for North America and has given its North American office a greater role in making safety-related decisions.

Under federal law, automakers must notify NHTSA within five days of determining that a safety defect exists and promptly conduct a recall.

The Transportation Department said the fine it is seeking is specifically tied to the sticking pedal defect and Toyota could face additional penalties if warranted by investigations.

The government has linked 52 deaths to crashes allegedly caused by accelerator problems in Toyotas. The recalls have led to congressional hearings, a criminal investigation by federal prosecutors, dozens of lawsuits and an intense review by the Transportation Department.

Toyota has attributed the problem to sticking gas pedals and accelerators that can become jammed in floor mats. Dealers have fixed 1.7 million vehicles under recall so far. The sticky accelerator pedal recall involves the 2007-2010 Camry, 2009-10 Corolla, 2009-10 Matrix, 2005-10 Avalon, the 2010 Highlander and 2007-10 Tundra.

Consumer groups have suggested electronics could be the culprit, and dozens of Toyota owners who had their cars fixed in the recall have complained of more problems with their vehicles surging forward unexpectedly. Toyota says it has found no evidence of an electrical problem.

Reviews of some recent high-profile crashes in San Diego and suburban New York have failed to find either mechanical or electronic problems. In the New York case, a police investigation found that the driver, not the car, was to blame.

Following the recalls, the Transportation Department demanded in February that Toyota turn over documents detailing when and how it learned of the problems with sticking accelerators and with floor mats trapping gas pedals.

NHTSA said documents provided by Toyota showed the automaker had known about the sticky pedal defect since at least Sept. 29, 2009, when it issued repair procedures to distributors in 31 European countries and Canada to address complaints of sticking pedals, sudden increases in engine RPM and sudden vehicle acceleration.

The government said the documents also show that Toyota knew that owners in the United States had experienced the same problems. Toyota has provided NHTSA with more than 70,000 pages of documents during the investigation.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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