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Ford, Toyota, GM: Comparing the Fines

Stocks in this article: F TM NSANY HMC


U.S. Transportation Secretary Ray LaHood announced on April 5 that the National Highway Traffic Safety Administration (NHTSA) is seeking the maximum civil penalty of $16.375 million against Toyota for failing to notify the auto safety agency of its dangerous "sticky pedal" defect for at least four months, despite knowing of the potential risk to consumers.

"This is just the first salvo in what promises to be a very expensive legal battle for Toyota," Wall Street Strategies analyst David Silver wrote in a note to investors. "The government indicated it is still considering more fines for the company; however, what could hurt worse for the company is that... the announcement could be used as fodder for the billions of dollars worth of civil lawsuits (and class action lawsuits) that have been filed against Toyota."

The penalty being sought against Toyota would be the largest civil penalty ever assessed against an auto manufacturer by NHTSA. Noteworthy is that this penalty relates only to Toyota's "sticky pedal" defect. The NHTSA is still investigating Toyota to determine if there are additional violations that warrant further penalties.

"Auto manufacturers are legally obligated to notify NHTSA within five business days if they determine that a safety defect exists," the announcement said. "NHTSA learned through documents obtained from Toyota that the company knew of the sticky pedal defect since at least September 29, 2009."

The NHTSA said that on that day Toyota issued repair procedures to its distributors in 31 European countries and Canada to address complaints of sticky accelerator pedals, sudden increases in engine RPM and sudden vehicle acceleration, and that the documents also show that Toyota was aware that consumers in the United States were experiencing the same problems.

About 2.3 million vehicles in the U.S. were recalled in late January for the sticky pedal defect.

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