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Toyota Takes $1.1 Billion Hit In Unintended Acceleration Settlement

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Toyota waited until boxing day to announce it had reached a tentative settlement in an ongoing class-action lawsuit representing owners claiming they were negatively impacted in the value of their cars due to the recent recalls spurred by alleged unintended acceleration. The original recalls focused primarily on ill-fitting floor mats and stuck accelerator pedals.

Despite even NASA finding no fault with the suspected Toyota and Lexus models included in the recalls (many suspect driver error), the new settlement, if it passes all associated appeals, will see the Japanese automaker launch a new customer-support program that will provide supplemental coverage for certain vehicle components and a retrofit of a brake override system to compatible cars.

Additionally, Toyota will offer cash payments to eligible customers who sold or turned-in their leased vehicles in a period during 2009-2010, as well as other specified persons, and to eligible current owners and lessees who will not be offered the brake override system. 

The proposed settlement would also establish additional driver education programs and fund new research into advanced safety technologies.

Toyota is estimating a total cost of $1.1 billion for the settlement, though some suggest the figure could balloon to triple this amount. The estimated costs can be broken down into $250 million for those customers that sold or turned-in their leased vehicles at a loss, $250 million in payments for owners whose vehicles cannot be updated with the brake override system; between $200 million and $400 million to install brake override systems on up to 3.25 million vehicles; $400 million for extending warranties; and about $200 million in court and lawyer fees.

Note, Toyota is facing two other legal actions related to the previous unintended acceleration issue. These cases concern incidents of injury or death relating to the unintended acceleration issue. Trials for these are scheduled to commence in February.

Additionally, just this month Toyota was charged $17.35 million by the National Highway Traffic Safety Administration for late reporting of a floor-mat issue on its Lexus RX 350.
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