(By Balaseshan) Toyota Motor Corp. (NYSE: TM) said it will take a one-time, $1.1 billion pre-tax charge related to U.S. economic loss litigation over claims of unintended acceleration in its vehicles.
Toyota Motor North America announced an agreement to resolve economic loss litigation in the U.S. related to previous recalls arising from sudden acceleration problems.
The suit was filed in 2010 after numerous complaints to federal regulators that Toyota vehicles were accelerating suddenly without warning and causing accidents and injuries, Star Tribune reported.
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, Reuters reported.
If this economic loss settlement is approved by the judge supervising multi-district litigation (MDL) pending in the U.S. District Court for the Central District of California, Toyota will launch a new customer-support program.
The new customer-support program will provide prospective supplemental coverage for certain vehicle components and will retrofit additional non-hybrid vehicle models subject to the floor mat recall with a free brake override system (BOS) to provide an added measure of confidence.
Further, assuming any appeals are resolved in favor of the settlement, Toyota will offer cash payments to eligible customers who sold or turned-in their leased vehicles in a period during 2009-2010, as well as other specified persons, and to eligible current owners and lessees who will not be offered BOS.
The proposed settlement would also establish additional driver education programs and fund new research into advanced safety technologies.
Toyota said it will take a pre-tax charge against earnings to cover the estimated costs of the economic loss settlement and possible resolution costs of civil litigation brought in California by the District Attorney of Orange County and an investigation by a multi-state group of Attorneys General stemming from previous recalls.
The company planned to book the charge as operating expenses in its October-December third quarter, according to Reuters.
"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," said Christopher Reynolds, Group Vice President and General Counsel, Toyota Motor Sales, U.S.A.
TM closed Wednesday's regular session at $90.36. The stock has been trading between $64.05 and $92.69 for the past 52 weeks.