Day on Torts
The National Highway Traffic Safety Administration (NHTSA) is seeking the maximum civil penalty of $16.375 million against Toyota Motor Corporation for failing to notify the auto safety agency of the dangerous “sticky pedal” defect for at least four months, despite knowing of the potential risk to consumers. Approximately 2.3 million vehicles in the U.S. were recalled in late January for the sticky pedal defect. The penalty being sought against Toyota would be the largest civil penalty ever assessed against an auto manufacturer by NHTSA.
NHTSA learned through documents obtained from Toyota that the company knew of the sticky pedal defect since at least September 29, 2009. That day, Toyota issued repair procedures to their distributors in 31 European countries and Canada to address complaints of sticky accelerator pedals, sudden increases in engine RPM, and sudden vehicle acceleration. The documents also show that Toyota was aware that consumers in the United States were experiencing the same problems. Auto manufacturers are legally obligated to notify NHTSA within five business days if they determine that a safety defect exists. The reason NHTSA requires automobile manufacturers to notify the government of safety defects is to prevent the risk of harm to others. Prompt reporting, the theory goes, permits the government to order a recall if the manufacturer refuses to do so and give consumers a warning of the risk posed by the defect.
$16.375 million is a lot of money – but not to Toyota. Last year Toyota’s revenues exceeded $200 billion. It has assets of some $300 billion and its shareholder equity exceeds $100 billion. If it agrees to pay the fine of $16.375 million, or the fine is upheld by a court, the fine will amount to .000081875% of its revenue last year.