DETROIT — Toyota Motor Corp. will pay $1.2 billion in what U.S. Attorney General Eric Holder said was the largest criminal penalty ever levied on an automaker in the U.S. to settle a criminal probe into sudden unintended acceleration that led to the recall of more than 10 million vehicles.
Toyota fully admits wrongdoing, agrees to pay the penalty and will submit to “rigorous” review by an independent monitor, Holder said Wednesday. Toyota also will be charged with wire fraud, with the prosecution deferred for three years as long as the company continues to cooperate with authorities.
“Put simply, Toyota’s conduct was shameful,” Holder said. “It showed a blatant disregard for systems and laws designed to look after the safety of consumers. By the company’s own admission it protected its brand ahead of its own consumers.”
Toyota recalled more than 10 million vehicles, mostly in the U.S., for problems including faulty brakes, sticky gas pedals and improper or misplaced floor mats that resulted in accidents and deaths.
The Japanese automaker has paid more than $66 million in fines for not reporting the acceleration problems when it first learned of them. Executives faced congressional hearings in 2010 into why it took so long to warn customers and recall the vehicles.
General Motors Co. faces a similar situation with congressional hearings expected next month on the timeliness of its reporting of and response to crashes and fatalities in small cars equipped with defective ignition switches. The automaker has said it will take a $300 million charge in the first quarter, largely to cover costs related to the recall.
“Other car companies should not repeat Toyota’s mistake,” Holder said. “A recall may damage a company’s reputation, but deceiving your customers makes that damage far more lasting.”
After the Toyota investigation, the auto industry as a whole became quicker to report recalls, however minor.
Christopher Reynolds, chief legal officer of Toyota Motor North America, said in a statement Wednesday, “At the time of these recalls, we took full responsibility for any concerns our actions may have caused customers, and we rededicated ourselves to earning their trust.”
The National Highway Traffic Safety Administration investigated the software and electronics in Toyota’s vehicles, but did not find any electrical malfunction that may have contributed to sudden acceleration.
But Toyota was deluged by lawsuits. Late last year, it agreed to pay more than $1 billion to resolve hundreds of claims from owners who said their vehicles lost value as a result of the recalls.
Toyota’s bottom line can withstand it. The automaker has said it could report record net income of about $18.7 billion when its fiscal year ends March 31. The automaker also has built up a large cash fund.
General Motors faces a similar class action suit in the wake of 1.6 million recalled vehicles with ignition switch issues that so far have resulted in 12 deaths and 31 accidents.
Toyota also faced wrongful death and injury lawsuits that have been consolidated in California state and federal courts.
In December, Toyota filed court documents saying it is in settlement talks on nearly 400 U.S. lawsuits, which included most but not all suits.
And an Oklahoma jury awarded $3 million in damages to the injured driver of a 2005 Camry and to the family of a passenger who was killed.
GM similarly faces the prospect of personal injury lawsuits.
The recalls have led to change at both automakers. GM is still in the early stages, having appointed a new safety officer on Tuesday and vowing to apply lessons learned from an internal investigation.
Toyota used this sudden acceleration crisis to change how it develops vehicles and makes decisions.
“In the more than four years since these recalls, we have gone back to basics at Toyota to put our customers first. We have made fundamental changes across our global operations to become a more responsive company — listening better to our customers’ needs and proactively taking action to serve them,” Reynolds said.
In addition to fixing the floor mats and pedals, Toyota has added four weeks’ time and more checks and balances to vehicle development process to ensure safe, quality vehicles and rebuild the public’s trust.
Rapid response teams were created to investigate customer concerns quickly, and field quality officers were added.
Toyota also restructured to provide more power and autonomy in its regional centers instead of controlling everything from its headquarters in Japan. North America got its first America CEO and the region got its own chief quality officer reporting directly to President Akio Toyoda.
Toyota announced in 2011 it was investing $50 million to launch a Collaborative Safety Research Center in Ann Arbor, Mich., to partner with more than 16 universities and institutions across North America on safety advances for the auto industry as a whole to share.
“Specifically, we have taken a number of steps that have enabled us to enhance quality control, respond more quickly to customer concerns, strengthen regional autonomy and speed decision-making,” Reynolds said.