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Oh, What a Feeling: Toyota Facing Multiple Class Action Lawsuit Among Recalls

Source: Global Times


Posted on 10 Feb 2010

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Repairing millions of gas pedals and brakes and convincing customers their vehicles are safe could end up being the least of Toyota's challenges, say some experts who believe that the expensive fallout from a flurry of lawsuits could end up costing even more than Toyota’s estimated $2 billion in recall costs.

There are already more than 30 U.S. lawsuits filed against Toyota involving the problems with its gas pedals alone, says Craig Hutson, senior investment grade analyst at Gimme Credit, a bond research service firm. And there are more lawsuits are in the works.

"Lawyers are champing at the bit to get at these guys, and the company has come out and largely admitted mistakes in respect to these issues," said Hutson. "It's hard to put a dollar amount on it, but multi-billion dollar costs are not out of the realm of possibility."

Hutson isn't alone in worrying about how much lawsuits could hurt Toyota. Credit rating agency Moody's cited the litigation risks when it warned Tuesday that it might downgrade Toyota's credit ratings.

The company also faces at least one class action suit involving problems with the brakes on 2010 models of the Prius and other hybrid vehicles. Toyota announced a recall for those hybrids yesterday.

New reports of problems with the steering of its Corolla could mean more lawsuits against Toyota. Safety experts estimate official complaints involving Toyota gas pedals show there have been 19 fatalities involving the recalled vehicles.

But Gary Robb, an attorney in Kansas City who is looking at filing cases, says he believes that number will increase significantly as people look more deeply into accidents for which no cause was ever determined.

"We've had so many calls from so many people now that this news has come out," he said. "Accidents that were heretofore attributed to driver error are very likely due to a malfunction of the gas pedal. There's going to be dozens of those incidents arising." Cases involving death or serious injury will likely be handled in individual lawsuits.

Robb said he's also looking at a class action case to try to recover billions of dollars he claims were lost in the resale value of the recalled vehicles. He said his experts estimate total losses could be in the $6 billion to $8 billion range. "For many people their car is their second largest investment," he said.

Other experts suggest that the loss in resale value is not as high as Robb's figure, but that it is still likely in the billions.

Kelley Blue Book, a leading used-car value service, is lowering its estimated prices for the recalled models this Friday by 2.5% to 3.5%. That's enough to lower the value of each vehicle by between $250 and $800.

The National Highway Transportation Safety Administration estimates that more than 6 million U.S. vehicles are affected by the recall. So based on Kelley Blue Book's estimates, the overall loss in resale value is likely to be at least $2 billion.


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