Toyota Will Pay $1.6 Billion Over Faulty Accelerator Suit

A federal judge approved a $1.6 billion settlement on Friday in a class-action lawsuit against Toyota to compensate vehicle owners who suffered financial losses after widespread reports of sudden, unintended acceleration in 2009 and 2010.

Owners who sold their vehicles at a loss through trade-ins and resale will receive from $125 to $10,000, depending on the level of depreciation. The settlement represents the end of the economic battle between Toyota and customers after several years of allegations of mechanical and electronic defects, though it does not cover individual personal-injury and wrongful death lawsuits that are still pending.

“This agreement allows us to resolve a legacy legal issue in a way that provides significant value to our customers and demonstrates that they can depend on Toyota to stand behind our vehicles,” said Celeste Migliore, National Business and Field Communications manager for Toyota Motor Sales, U.S.A., Inc. The automaker will take a one-time $1.1 billion charge to its earnings cover the settlement costs.

James V. Selna, United States District Court judge of the Central District of California, who presided over the suit since 2010 after widespread reports of complaints and accidents related to unintended acceleration, granted final approval after the terms were proposed in December.

A Toyota technician makes repairs on an accelerator pedal.CreditAndrew Winning/Reuters

The settlement is “extraordinary because every single dollar in the cash fund will go to claimants,” Judge Selna said in a statement. A decision posted to the court’s Web site calls the settlement “fair, adequate and reasonable.”

Toyota is required as part of the agreement to install safety upgrades in about 3.2 million of its vehicles. The automaker is to establish two funds of $250 million to compensate owners not eligible for safety upgrades and those who sold their cars between Sept. 1, 2009, and Dec. 31, 2010, at a loss.

The settlement also requires Toyota to pay $30 million for automotive safety research on driver behavior and unintended acceleration. It would also provide a customer support program for more than 16 million current Toyota owners, who will be eligible for free repairs on certain parts for up to 10 years. 

The sudden acceleration problems marred Toyota’s reputation for quality. The automaker eventually recalled more than 11 million vehicles in connection with problems including floor mats that caused the accelerator to get stuck.

Steve Berman, who represented the plaintiffs in the class-action suit, called the settlement “a significant financial recovery.”

“This is a great settlement for consumers,” he said in a statement. “It includes both safety fixes to make Toyota vehicles safer as well as monetary relief for owners who saw a reduction in their vehicle’s value.”