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Toyota agrees $1.1bn payment to settle acceleration lawsuit

Publish Date27/12/2012 10:14:39 AM

Last Update27/12/2012 10:57:12 AM

Toyota agrees $1.1bn payment to settle acceleration lawsuit

Toyota Motor Corp. agreed to a $1.1 billion payment to settle class-action litigation stemming from claims that millions of its vehicles accelerate without drivers` intentions.

These claims soured Japan`s largest automaker`s reputation for quality and undermined its sales on a global scale.

The proposed settlement, filed in a federal court in California, will compensate customers for economic losses related to possible safety defects in Toyota cars. The sum of $1.1 billion is expected to cover 16 million Toyota, Lexus and Scion vehicles sole worldwide, spanning model years 2009 to 2010 are covered in the action. The company has recalled almost 14 million cars worldwide.

"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."

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 quarter.

Separately, Toyota projected its global sales would rise 2 percent to a record in 2013. This suggests that the automaker has fully recovered from a plunge in business following 2011`s tsunami earthquake and consumer antipathy in China over row on disputed islands.

Following the news on the settlement, Toyota shares rose almost 3 percent in Tokyo. Investors attributed the rise in the Toyota share to the company`s willingness to remove one uncertainty over its market position and managed itself really well in terms of the automaker`s improving sales despite weaker yen and Japan`s dispute with China – world`s largest auto market.

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