Ford, Toyota, GM: Comparing the Fines

Ford, GM and Firestone are among the other auto industry players that have, like Toyota, received high civil penalty marks in the past.
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(Toyota story updated with LaHood's latest thoughts on Toyota's safety control measures and company statement on progress with remedying recalled vehicles)

NEW YORK (TheStreet) -- U.S. Transportation Secretary Ray LaHood seems to be warming up to Toyota (TM) - Get Report after levying a huge fine against the automaker for being slow to notify authorities of its dangerous "sticky pedal" problems, despite being aware of the problems.

Speaking at a press conference after meeting with Toyota's president Akio Toyoda at the company's headquarters in Japan, LaHood expressed encouragement by the company's efforts to improve its quality control measures since Toyoda's harrowing visit to the U.S. capital in February, where he was grilled by angry congressional members over the automaker's auto safety defects and massive recalls. However, LaHood says he's still looking for continued improvement in the company's safety mechanisms.

LaHood's department is still in the process of investigating page after page of documents handed over by the firm to determine whether to charge Toyota additional fines.

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Although Toyota continues to be the poster child of much of what hasn't been going right in the auto sector, the automaker appears determined to win back the public's favor, whether through aggressive customer incentive campaigns, expensive PR maneuvers or the overt verbalization of its progress on fixing its vehicle safety issues -- most recently with the announcement of passing a 3 million milestone in implementing recall remedies and significantly expanding its number of event-data recorder readout devices in North America.

On May 5 the automaker announced that it has expanded the number of event data recorder readout devices in North America and the U.S. territories to 150 and is actively training internal and field staff on their use. These devices record specific vehicle information in the event of air bag deployment or sufficient impact, and are intended to help understand how a vehicle's various systems functioned in a crash, Toyota said.

Toyota announced on May 4 that more than three million remedies have been performed for three recent recalls, including those for sticking accelerator pedals and floor mat pedal entrapment. Toyota said the fixes include 1.6 million to address the potential for sticking accelerator pedals, and 1.5 million to address the potential for floor mat pedal entrapment, as well as 115,000 program updates to the anti-lock brake systems in certain 2010 Prius and Lexus models.

Toyota said that more than 732,000 vehicles have received both the floor mat and sticking pedal modifications, bringing the total number of recalled vehicles that have been serviced to about 2.4 million.

On April 19, U.S. Transportation Secretary Ray LaHood gave a public response to Toyota's agreement to pay the largest civil penalty ever assessed against an auto manufacturer by the National Highway Traffic Safety Administration regarding the company's failure 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.

"I am pleased that Toyota has accepted responsibility for violating its legal obligations to report any defects promptly. We are continuing to investigate whether the company has lived up to all its disclosure obligations," LaHood said.

Read on for


's April coverage of Toyota's large, civil penalty over its vehicle defects and how it compares to its peers' past civil fines....

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.

Another automaker to keep an eye on right now is



, analyst Jessica Caldwell said.

Kyodo News

on April 6 reported that Nissan is set to recall 25,024 passenger cars in five models sold in Japan because of defects in their gas pedals.

Caldwell said that if regulators discover "one root cause" of safety problems in the auto sector as a whole, they would have to "levy similar penalties among other automakers. That would only be fair."

Though Toyota remains the poster child of vehicle safety problems, Caldwell said that judging by Toyota's March sales of 166,644 vehicles, "It's hard to say a lot of people don't think their vehicles are safe."

The automaker recorded a 35.3% rise in

March U.S. sales

compared to the previous year amid aggressive customer incentives.

Consumer complaints of unintended acceleration

have been filed against


(F) - Get Report




General Motors



(HMC) - Get Report

, Nissan with the National Highway Traffic Safety Administration.

Caldwell notes that the $16.38 million fine against Toyota, while significant, isn't the biggest of its financial worries right now. Pending litigation and class-action law suits, on the other hand, pose the most significant risks.

Silver of Wall Street Strategies pointed out that the civil penalty announcement brings Toyota's massive recalls "back to the forefront" after things started to look up a bit for the carmaker.

"It is a big blow for the company (and could push the cost of the recalls above $4 billion), but we expect Toyota to rebound," Silver wrote. However, the positive side of all this and its loss of market share points around the world is that it forces the company to "compete on the world stage" with peers for the "quality dollar."

"That being said, the next few months could be one of the best times to buy a Toyota from a value standpoint," Silver commented.

Toyota stated that it's aware of the NHTSA's view on the handling of its "sticky pedal" problems, but hasn't yet received an official letter regarding the civil penalty. The company is also reiterating the steps it's taking to improve communication with regulators and customers on safety issues, including through the appointment of a new chief quality officer for North America.

Toyota said that it will continue with its customer incentives, including zero-percent financing for up to five years on vehicles including the 2010 Camry, Avalon, Corolla, Matrix, Highlander, RAV4 and Tundra; certain maintenance services to all its customers at no cost; and the option of a $3,000 rebate for the Avalon in lieu of a loan.

Toyota has received what is by far the largest civil penalty ever assessed against an auto manufacturer by the National Highway Traffic Safety Administration.

However, Toyota is far from alone in receiving a harsh financial slap on the wrist for violating NHTSA standards. Its peers and other auto industry players -- including Ford and General Motors -- have also, in the past, received fines that were relatively large, considering the time in which they were handed out.

For example, GM in 2004 paid a civil fine of $1 million to settle charges that it didn't make the grade in conducting a timely recall to the windshield wiper failure in 581,344 Trailblazers, Bravadas, Envoys and Isuzu Ascenders made in 2002 and 2003.

During the same year,




paid civil fines amounting to more than $9 million for not meeting corporate average fuel economy limits.

In 1999, Ford was asked to pay the government a civil fine of $425,000 to settle a row regarding the timeliness of Ford's April, 1996, recall of about 7.8 million vehicles made between 1988 and 1992 to replace ignition switches that had shown a risk of steering-column and under-dash fires, as well as the wholeness and accuracy of the company's responses to NHTSA requests for information in four investigations.

Also, in 1980,

Firestone Tire & Rubber

agreed to pay $500,000 in civil fines in connection to a case involving non-compliance investigations on Firestone 500 steel-belted radial tires and a related tire line manufactured by Firestone and marketed under the "Primero" brand name. It was the largest civil penalty ever assessed under the Safety Act at that time.

Toyota American depository receipts are trading down 0.6% at $80.30 Wednesday, while Ford stock is up 0.9% at $12.80.

-- Reported by Andrea Tse in New York


>>Toyota March Sales Up Sharply

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