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On Monday, the National Highway Traffic Safety Administration (NHTSA) announced it would be fining Japanese car maker Toyota nearly $16.4 million for a failure to report problems with accelerator pedals in its cars. The government says it has evidence Toyota knew of the problem as early as September 2009, but did not act to recall any vehicles until January, 2010.
According to a report by The Detroit News, the $16 million plus fine is the largest the government could legally levy against the car company since Congress increased the penalties in 2000. Previously, the largest fine levied to date was a $1 million penalty against General Motors in 2004 for failing to disclose a defect with windshield wipers. With this fine, federal authorities are hoping to send a message that they believe the automaker deliberately concealed safety information from them. "We now have proof that Toyota failed to live up to its legal obligations," Transportation Secretary Ray LaHood said. "Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families."
While to the average car buyer, $16 million is a great deal of money, to a car maker, it is simply not. Toyota's revenue came in at $209 billion last year alone. So could there be any deterrence effect in such a relatively small fine? If not in the numbers, perhaps in the consequences. As noted in the Wall Street Journal Law Blog, the fine and government statements that Toyota knowingly hid defects from officials and consumers will only serve to bolster plaintiffs' claims in the wide array of suits against the company. The WSJ Blog notes a report that the government findings could even reinforce allegations made under the RICO (Racketeer Influenced and Corrupt Organizations) Act that Toyota went as far as conspiring to mislead consumers and the federal government about the extent of its safety problems.
Beyond the slight money issue and the legal ramifications, there is also the ripple effect on the company's public image. The Detroit News writes that although March sales for Toyotas were strong, that could change if the public becomes convinced the company actively hid the truth. "If it was done knowingly," said, Mike Rozembajgier, director of recalls for Expert- RECALL, a consulting firm that helps manufacturers conduct product recalls, "then it certainly becomes a game-changer for consumers."
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