Toyota's $1 billion settlement: Has the automaker buried its recall problems?

The Japanese company is seeking to restore its reputation for quality and safety

Consumers may be learning to trust Toyota again after it was marred by problems in 2009 and 2010.
(Image credit: AP Photo/Shizuo Kambayashi)

On Thursday, Toyota announced that it would shell out $1.1 billion to settle charges stemming from the unintended acceleration of its vehicles, which led to a highly publicized series of recalls in 2009 and 2010. Owners of the vehicles will be eligible for new safety features, including a brake override system, and former owners who sold their Toyotas for a loss will be reimbursed with direct payments. The hefty settlement, considered the largest of its kind, is Toyota's boldest move yet to shed its image as the maker of runaway cars, which took a heavy toll on the company's bottom line, says Mike Ramsey at The Wall Street Journal:

The 2009/2010 recalls and public scrutiny of accidents involving its vehicles — including congressional hearings — dented Toyota's reputation for quality and undermined its sales. Its U.S. sales were flat in 2010, a year in which almost every other major auto maker posted gains, and ended its 30-year unbroken run of market-share increases in the U.S.

In all, Toyota ended up recalling 5.3 million vehicles in the U.S. for problems related to floor mats that caused accelerators to jam. An additional 2.2 million cars were recalled for having accelerator pedals that stuck on their own. In addition to the latest $1.1 billion settlement, Toyota expects to pay another $2 billion in legal costs. And the company still has to contend with a raft of personal-injury and wrongful-death cases, as well as a class-action suit brought by 28 states for business practices.

However, Toyota emerged from the settlement in a stronger position than when the suit started. The company had been accused of implementing a faulty electronics system in its cars, but government officials concluded that wasn't the case. Indeed, the government concluded that driver error was the main cause of most of the accidents cited in the suit. In addition, Toyota did not admit wrongdoing in the settlement.

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And it appears that customers have learned to trust Toyota again. After a 2011 marred by the Japanese tsunami and earthquake, Toyota is on track to reclaim its crown as the world's largest automaker. The company's U.S. sales are up 29 percent so far this year. "Toyota's outstanding performance this year is proof that consumer sentiment for the company’s products has already recovered to a degree as if nothing ever happened," Jesse Toprak, an analyst at TrueCar.com, tells Forbes.

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Ryu Spaeth

Ryu Spaeth is deputy editor at TheWeek.com. Follow him on Twitter.