* Case among the biggest in U.S. autos class-action
* Settlement would cover most litigation over unintended
* Some 16 mln Toyota, Lexus and Scion vehicles covered by
* Settlement must be approved by a California federal judge
* Toyota shares rise 2.7 pct in Tokyo
By Deepa Seetharaman and Bernie Woodall
DETROIT, Dec 26 Toyota Motor Corp has
agreed to spend $1.1 billion to settle sweeping U.S.
class-action litigation over claims that millions of its
vehicles accelerate unintentionally, as the Japanese automaker
seeks to move past the biggest safety crisis in its history.
Shares of Toyota rose nearly 3 percent in Tokyo following
the news, with some investors saying the settlement removed one
uncertainty for the company and looked manageable given its
improving sales outlook and a weaker yen.
The proposed settlement will compensate customers for
economic losses related to possible safety defects in Toyota
vehicles, covering most of the litigation involving unintended
acceleration, although it does not cover claims for wrongful
death or injuries.
About 16 million Toyota, Lexus and Scion vehicles sold in
the United States spanning the model years 1998 to 2010 are
covered by the action, according to court filings made public on
Wednesday. Thirty nameplates are affected, including the
top-selling Toyota Camry midsize sedan and Corolla compact car.
Toyota, the No. 3 automaker in the U.S. market, admitted no
fault in proposing the settlement, one of the largest of U.S.
mass class-action litigation in the automotive sector.
"This was a difficult decision, especially since reliable
scientific evidence and multiple independent evaluations have
confirmed the safety of Toyota's electronic throttle control
systems," Christopher Reynolds, general counsel for Toyota Motor
Sales, USA, said in a statement.
"However, we concluded that turning the page on this legacy
legal issue through the positive steps we are taking is in the
best interests of the company, our employees, our dealers and,
most of all, our customers."
The figure eclipses other settlements in the auto industry
including Bridgestone Corp's $240 million payout to Ford Motor
Co in 2005 over Ford's massive Firestone tire safety recall in
2001. Ford replaced 13 million Firestone tires, installed mostly
as original equipment on the company's popular Explorer SUV, in
one of the biggest recalls in U.S. history.
Hagens Berman, the law firm representing Toyota owners who
brought the lawsuit in 2010, issued a statement saying that the
settlement was valued between $1.2 billion and $1.4 billion. In
a memo filed in court, the lawyers said the settlement was "a
landmark, if not a record, settlement in automobile defect class
action litigation in the United States."
Toyota said it would take a one-time pretax charge of $1.1
billion to cover the costs. The company said it planned to book
the charge as operating expenses in its October-December third
"This is positive, as it removes the factor that was the
biggest concern when it came to lawsuits ... Because Toyota's
absolute numbers are very big when it comes to profits, it's
hardly going to have an impact," said Koji Endo, an autos
analyst at Advanced Research in Tokyo.
Toyota may be able to offset costs with a rise in its
profits as the yen weakens, he added. Toyota's operating profit
increases by 35 billion yen for every one-yen rise in the value
of the dollar. The automaker has forecast an operating profit of
1.05 trillion yen ($12.3 billion) for the financial year ending
in March 2013.
Toyota shares rose 2.7 percent, compared with a 1 percent
rise in Japan's benchmark Nikkei index.
Toyota's recall of more than 10 million vehicles between
2009 and 2011 hurt the company's reputation for reliability and
The effect of the recalls on sales and loyalty remains
"difficult to isolate," IHS Automotive analyst Rebecca Lindland
"A lot of their growth through the early 2000s were
first-time Toyota buyers," she said. "Those are the people that
were most vulnerable to saying, 'I'll never own a Toyota again.'
The long term effects won't fully be realized until all of the
cars that have been impacted by the recall have been retired."
The biggest safety crisis in Toyota's history began to get
public notice in August 2009 when an off-duty California Highway
Patrol officer Mark Saylor and three members of his family were
killed in a Lexus ES 350 that crashed at a high speed.
A separate lawsuit over the death of the Saylor family was
settled out of court. A handful of wrongful death and personal
injury cases are still pending, but the vast majority of the
litigation over unintended acceleration will be finished if the
proposed settlement is approved, said a person with knowledge of
the remaining lawsuits who wished to remain anonymous.
Within a half year of the Saylor family crash, Toyota
President Akio Toyoda and other company executives were
questioned in a high-profile U.S. Congressional hearing, and
Toyoda made a public apology.
Toyota maintained all along that its electronic throttle
control system was not at fault, and reiterated that on
Wednesday. It has blamed ill-fitting floor mats and sticky gas
pedals for the problem.
A study by U.S. safety regulator the National Highway
Traffic Safety Administration and NASA found no link between the
reports of unintended acceleration and Toyota's electronic
throttle control system.
The settlement, which must be approved by a California
federal judge, includes direct payments to customers as well as
the installation of a brake override system in more than 2.7
million vehicles, according to the settlement agreement filed in
The terms include a $250 million fund for former Toyota
owners who sold vehicles at reduced prices and a separate $250
million fund for owners not eligible for the brake override
Attorneys for the plaintiffs are slated to receive up to
$200 million in fees and $27 million in costs, according to
Richard Cupp, a professor at Pepperdine University School of
Law, said the settlement was large for the automotive sector but
was dwarfed by other litigation involving economic loss claims.
State cases against the tobacco industry, for instance, amounted
to more than $200 billion.
"That could mean that lawsuits like these could become
increasingly common, even where there is not provable physical
injury on large scale," Cupp said.
The case is In re: Toyota Motor Corp. Unintended
Acceleration Marketing, Sales Practices and Products Liability
Litigation, U.S. District Court, Central District of California,