What is the Impact of Toyota’s $1.1 Billion Settlement?
Toyota Motor (NYSE:TM) and lawyers suing the company were given additional time for the final approval of a $1.1 billion pretax settlement related to unintended acceleration. The additional time will be used to provide updated figures as to how money will be allocated to the beneficiaries in the settlement.
More than 10 million cars were recalled in 2009 and 2010 for problems relating to unintended acceleration. The settlement would resolve the economic-loss portion of the lawsuit, which was filed by Toyota owners. Owners contended that the company had driven down the vehicle’s value by failing to disclose or fix defects related to unintended acceleration.
Toyota had been confident of its defense for the case, but ultimately decided that the impending years of litigation, combined with the lawsuit’s potential damage to its customers, wasn’t worth it. While some of the details of the settlement are unclear — cost of administration, allocation of funds to those who haven’t filed claims — all parties appear to be satisfied with the results. “The settlement will provide real value to Toyota customers who are the members of this class,” J. Gordon Cooney, a Toyota attorney, said.
With $757 million in cash and $875 million in “non-monetary” benefits, the value of the settlement is worth more than $1.6 billion. The non-monetary benefits include installing brake overrides in eligible vehicles and other installation features.
While a billion dollar settlement is no laughing matter, the settlement represents one of the better outcomes of a lawsuit that could have potentially damaged Toyota’s reputation for years to come. By getting the settlement out of the way, Toyota can begin to put the lawsuit in the rearview mirror and look ahead to the future where they seem certain to reach highs not seen since 2007 — two years before the first case of unintended acceleration. Relative to its peers, Toyota has led, in year-to-date performance, by a wide margin.
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