Automotive News
The trouble at Toyota
Amid recalls and recriminations, automaker finds itself in legal stew

Kathy Jackson | October 5, 2009 - 12:01 am ET


LOS ANGELES -- Embarrassing safety-related recalls and shocking accusations of cover-ups? They can happen to any carmaker, but of late they seem to be happening almost exclusively to Toyota.

The company is faced with a series of legal challenges alleging defects that caused vehicle occupants to lose their lives. The three cases -- involving rollovers, faulty steering rods and unintended acceleration -- have called into question Toyota's vaunted safety record and raised doubts about its reputation for quick, candid and compassionate response to quality and safety problems.

The latest uproar was sparked by an Aug. 28 incident near San Diego in which an off-duty California Highway Patrol officer and three relatives were killed in a crash of a 2009 Lexus ES 350. Authorities suspect that a floor mat catching on the accelerator may have caused the accident.

In this case, Toyota executives have taken the high road. This week the company will send an advisory to consumers and is hustling to issue a voluntary recall to come up with a remedy.

"Safety is tantamount to Toyota," said company spokesman Irv Miller.

Even CEO Akio Toyoda weighed in from Japan.

"We would like to pay our deepest condolences for the loss of four precious lives," Toyoda said Friday, Oct. 2, at a news conference in Tokyo.

But in two other court cases, Toyota's responsiveness and integrity are under assault.

In a case being heard in a Los Angeles courtroom this week, Toyota is accused of lying and committing fraud by not promptly recalling pickups and SUVs that may have been equipped with defective steering rods -- actions that the plaintiffs say caused four deaths and numerous injuries in separate incidents.

In July, Toyota was slammed with a lawsuit by a former Toyota attorney who claims the company unlawfully withheld and concealed evidence in suits involving rollover accidents.

Toyota vigorously defends itself in each case, but some wonder whether it is straying from its mission.

"The issue is that Toyota seems to be taking longer than they did in the past," said George Magliano, director of North American auto industry research for IHS Global Insight. "They've had issues with mats in the past. Why didn't they fix it?"

The upcoming recall stemming from the San Diego accident involves 3.8 million Toyota and Lexus brand vehicles, the company's largest recall ever in this country.

Toyota says it will do whatever it takes to fix the problem, involving seven late-model cars and trucks. Spokesman Brian Lyons said Toyota issued a recall of 30,000 accessory floor mats used in 2007 and early 2008 model Camrys and Lexus ES 350 models that were snagging on accelerators.

He said the upcoming recall will not involve floor mats. One potential remedy is to redesign the accelerator pedal so it will not get jammed by a floor mat that shifts out of position.

"We are working to move forward with NHTSA," Toyota's Miller said. "We are always concerned about what impact this will have on future business, but our dealers are standing by to help the customers."

Miller said there had been an unspecified number of floor mat complaints, but the recall was sparked by the Aug. 28 accident.

"The San Diego accident was tragic for all of us," he said.

Toyota's woes
• 3.8 million vehicles will be recalled to fix an acceleration problem.
• 4 wrongful-death lawsuits have been filed alleging faulty steering rods in trucks.
• A former Toyota attorney charges the company with covering up rollover accidents.

Steering rods

But in the case of the broken steering rods, Toyota comes across as a lot less compassionate.

A series of deaths involving the broken rods occurred between 1997 and 2007. Four lawsuits filed this year in Los Angeles Superior Court charge that in each case, the rods broke, causing the drivers to lose control. In three of the crashes, the driver was killed. A baby perished in the fourth accident.

This week Toyota will argue that two of the cases should be dismissed because of the statute of limitations.

"We're saying, 'We're accusing you of fraud so you shouldn't be able to hide behind the statute of limitations,'" said attorney John Kristensen, who represents the plaintiffs. "In Toyota's quest to be No. 1, they gave up safety."

In October 2005, Toyota recalled 977,839 pickups and SUVs that might have been equipped with the defective steering rods. The vehicles in question are 1990 to 1995 model 4Runners, 1989 to 1995 small pickups and 1993 to 1998 T-100 pickups.

But the plaintiffs contend that Toyota knew about the faulty rods long before it recalled the vehicles. That's because about 330,000 Toyota vehicles were recalled in Japan in October 2004 to address the same problem.

Kristensen charges that Toyota had nearly 100 warranty claims in the United States for broken steering rods before the Japanese recall but failed to inform the National Highway Traffic Safety Administration.

By law, Toyota was required to alert NHTSA of foreign recalls and explain why it was not issuing the same recall in the United States. In a legal filing, Toyota Motor North America Inc. said it was unaware of complaints in the United States in October 2004 when it informed NHTSA of the Japan recall.

The reason? Toyota Motor North America is separate from Toyota Motor Sales U.S.A. "and is not responsible for receiving or compiling customer complaint information about Toyota vehicles in the field."

Toyota Motor North America is responsible for the automaker's external and governmental affairs, technical and regulatory affairs and corporate and project planning in North America. Toyota Motor Sales primarily sells and markets vehicles here.

Lawyer: That's no defense

Kristensen argues that the automaker cannot offer as a defense that one unit of Toyota did not inform another.

Lyons would not comment on that case. But in a joint July filing by Toyota Motor Sales and Toyota Motor North America, the companies contend that speeding, alcohol, the absence of seat belts or all three played a role in the accidents.

"At no time during the extensive investigation did the police conclude that this crash was caused by a broken steering relay rod or any other defect in the truck," Toyota said of a 2007 accident in Idaho, in which 18-year-old Levi Stewart was killed when his 1991 Toyota pickup rolled over.

Kristensen said Toyota "acted with malice."

"I'm also going after the execs in Japan," he said. "I will put them on the stand. Even if I have to go to Japan, they will talk. I'm prepared to take this to trial if Toyota wants a showdown."

Kristensen said a quarterly report submitted to NHTSA by Toyota in December 2006 shows that of the 977,839 vehicles involved in the U.S. recall, only 314,362 were inspected and repaired. Toyota said 124,416 customers were unreachable. "Thirty percent repaired is atrocious," he said.

Hiding the facts?

In another case, a whistleblower -- former Toyota Motor Sales attorney Dimitrios Biller -- claims Toyota hid evidence in more than 300 rollover accidents involving roof crush problems.

Biller, a Toyota lawyer from 2003 to 2007, has sued the automaker, alleging it withheld and destroyed evidence linked to rollovers. He said he was fired because he wanted to report the alleged abuses. Biller received a $3.7 million severance package from Toyota. Toyota tried to have Biller's complaint sealed, but on Sept. 15, a U.S. District Court judge in California denied Toyota's request.

No court date has been set. But in a statement, Toyota says it is "committed to the highest standards of product quality and safety, and we maintain the highest professional and ethical standards in our legal practices as well."

Repeated attempts to reach Biller or his lawyers were unsuccessful. Toyota claims that Biller has a history of suing former employers as well as attorneys who represented him. In one case, Toyota says, Biller sued the Los Angeles district attorney's office for $50 million on the grounds that his colleagues were conspiring to have him fired.

"In court papers related to these suits," Toyota says, "Mr. Biller claims he is disabled and has suffered from organic brain disease for most of his life."

But Toyota has been unable to disentangle itself from controversy. Dan Gorrell, president of AutoStratagem, a research and consulting company in Tustin, Calif., said Toyota has made mistakes -- adding too much capacity and growing arrogant. But he doesn't think its reputation will suffer greatly.

"Toyota has a deep reservoir of trust among U.S. buyers," Gorrell said. "Toyota has done a lot of wrong things, but it still has that trust."

Last week Akio Toyoda addressed the latest controversy head on. Speaking of the San Diego crash, the grandson of the company's founder said: "Customers who chose Toyota and Lexus cars because those brands are safe and secure are now beset with anxiety. I regret and apologize for this development."