TOYOTA turned a profit of about $200 million in the last quarter after losing money in the first 3 quarters of last year because of the recession. But this piece of good news has been overshadowed by the colossal problem that has blossomed from the "sticky accelerator" issue that first surfaced in 2009. Last year, an Orange County police officer was driving his Lexus SUV on the freeway when the car accelerated by itself and could not be stopped resulting in the death of the driver when it collided with another car at 100 mph Toyota initially denied that there was any mechanical problem involved and blamed the floor mat that was slightly longer than required, causing the accelerator pedal to be depressed. Then Toyota said that there was something wrong with the accelerator mechanism with the keyless system. This week, Toyota stopped production and sales of 8 models including the very popular Camry. Toyota dealers have nothing to sell. The company has recalled a total of 5.2 million cars because of the ‘sticky accelerator’ problem.
Toyota started selling cars in America in 1950 and has continually built up its sterling reputation for quality over six decades. I am a Toyota fan myself. All my cars have been Toyota’s. I was pretty happy with my Prius until I got a letter from the company late last year saying that may be something amiss with the accelerator. So I pulled the floor mat back an inch to make sure that it did not interfere with the accelerator pedal. But what if the cause is not the floor mat but something else? I don’t want to end up saving money on gas but careening on the 10 freeway at 100 mph and unable to stop. I brought the car to the dealer who told me that they have not been told by Toyota what to do other than pull the floor mat away from the pedal.
Just imagine what could happen with 5.2 million defective accelerators. The company would have to fix the accelerator at their expense. Let’s assume that the cost of fixing the accelerator is $2,000 x 5.2 million cars is over $10 billion. Add the decrease in revenues due to the complete stoppage of production and sales for 8 models while overhead expenses continue unabated every day and every month. To make matters worse, it appears that the carmaker knew that the problem existed several years ago. If it had prior knowledge of the defect, Toyota perpetrated a massive fraud on the buying public for several years because the public, including myself, bought Toyota cars because of its untarnished reputation for quality and safety. Therefore, there may possibly be a class suit in the offing to rescind purchase contracts and leases for Toyota cars because many members of the public would not have purchased or leased a Toyota if they had known of the accelerator problem. Millions of Toyotas would be returned and the company would have to give purchasers and lessees their money back. This could conceivably involve a trillion dollars, a trillion dollars that the company does not have.
GM has capitalized on Toyota’s problem with its recent ad that tells the viewer, "Don’t die in your Toyota; buy a GM car instead!" GM has also offered $1,000 to any buyer who switches from a Toyota to GM. Hence, Toyota’s reputation for quality, reliability & safety has now been badly damaged by the "sticky accelerator" problem. Further, families of people who have died or have been seriously injured in their Toyota and Lexus cars are going to file lawsuits for wrongful death and serious bodily injuries. Toyota has no defense. The orange county police officer who was killed last year in his runaway Lexus was on his cell phone saying that he could not stop his Lexus from accelerating. Punitive damages in the billions are not farfetched because Toyota knew of the defect. These people did not have to die.
Toyota might require bankruptcy protection.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.
( Published February 3, 2010 in Asian Journal Los Angeles p. B4 )
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