After a year of devastating PR stories that included unintended acceleration due to faulty car mats, delayed corporate reaction to potential recalls, and an additional forthcoming Lexus GX 460 recall, it turns out Toyota expects to post a $885 million net profit for the fiscal year that ended March 31.
And Toyota’s lucky streak doesn’t end there. Without admitting wrongdoing, the company announced today that it would pay the $16.4 million fine imposed by the Department of Transportation for neglecting to quickly notify authorities about its reported accelerator problems. But although the DOT has said it might seek a second fine of the same amount for a second safety issue, the New York Times reports that Toyota should really be thankful for the government imposed fines. Without them, the company would likely be on the hook for about $14 billion, or about $6,000 for each of the 2.3 million cars sold with defective pedals.
Toyota said its decision to pay the fine, the highest ever sought by the DOT, was based on the hope “to avoid a protracted dispute and possible litigation.” The statement repeated the company’s claim that “we did not try to hide a defect to avoid dealing with a safety problem.”
Most analysts agree that paying the fine was a smart move by Toyota, which will likely be mired in personal injury lawsuits for years. But it will likely have a negative impact on the company’s balance sheet, which included approximately $24 billion in cash assets at the end of last year. As Gimme Credit analyst Craig Hutson notes, Toyota’s financial problems are far from over. “We think the combination of legal costs, higher marketing costs, increased incentives and all that could easily be multiples of the $2 billion in costs for the 2010 year that Toyota has forecast,” he said.
Despite recalling more than 9 million vehicles, including the Lexus GX 460, since November, Toyota continues to deflect blame. “We have acknowledged that we could have done a better job of sharing relevant information within our global operations and outside the company,” says the company. “But we did not try to hide a defect to avoid dealing with a safety problem.” More and more, that looks like it will be up to the courts to determine.
Andy Gillin received his Bachelor’s Degree from the University of California at Berkeley and his law degree from the University of Chicago. He is the managing partner of GJEL Accident Attorneys and has written and lectured in the field of plaintiffs’ personal injury law for numerous organizations. Andy is a highly recognized wrongful death lawyer in California.