Toyota pays the price for poor handling

The US government has fined Toyota an additional $32.4m, for its handling of two safety recalls.

by Dave Waller
Last Updated: 09 Oct 2013
The civil penalties are record-setting in their scale, and will finally put to bed the investigations into how Toyota dealt with its embarrassing product recalls – over accelerator pedals that could get trapped in floor mats and potentially breakable steering relay rods. Two optional extras that few car buyers are keen on.

But while the carmaker will be happy to pull out of that particular lay-by, it may find it hard to enjoy the ride: Toyota’s already had to fork out a $16.4m fine in a related investigation, so it stands to lose a total $48.8m. And when it’s had to recall 11m vehicles around the world since in just over a year, for 14 different problems, and seen its share price tank as a result, you wouldn’t blame the company if it headed straight back to the garage for Christmas, hoping that the New Year brings better fortune.

It certainly can’t get much worse. In September last year, Toyota recalled 4 million cars after fears that the accelerator pedal could get stuck on the floormat. It got a fine for that in April – $16.4m – the maximum fine allowed under law for a single case, for failing to alert US regulators promptly. In January it recalled 2.3m cars because of potentially faulty accelerator pedals, in August, 1.1m Corolla and Matrix models over an engine control system fault, and in October more than 1.5m cars over brake and fuel pump defects. All these recalls are certainly a good way to ease congestion, but it’s not very good for a company’s reputation.

The fiscal punishment is less about the actual fault, more down to how slowly it got round to telling anyone about it. Under federal law, car manufacturers must notify the National Highway Traffic Safety Administration within five days of determining that a safety defect exists and promptly conduct a recall. And when you’re in the business of car manufacture, that’s the kind of admin you need to keep on top of. Toyota's board of directors agreed to the penalties - although without admitting to any violations of US laws.

While it’s going to leave Toyota short of small change for parking, it can now concentrate on its drive to rebuild its reputation, retain its customers and attract new ones. Which could be a difficult manoeuvre.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today