Sustained Outrage

Toyota’s disclosures: Savings before safety?

Akio_Toyoda_001In the coming weeks, Toyota officials — including President and CEO Akio Toyoda (right), a grandson of the company’s founder — will testify before Congress to answer questions about when the company knew what about various safety issues, including unintended acceleration in some models.

In preparation, Toyota has turned over thousands of pages of company documents. These include, as the New York Times and many others reported, an internal memo that claimed that the company saved $100 million when it “negotiated an equipment recall” with the National Highway Traffic Safety Administration in 2007 in response to reports of unintended acceleration in certain Camry and Lexus ES 350 sedans. Consequently, 55,000 floormats were recalled, and the agency did not find a defect. As the Associated Press noted:

The savings are listed under the title, “Wins for Toyota – Safety Group.” The document cites millions of dollars in other savings by delaying safety regulations, avoiding defect investigations and slowing down other industry requirements.

The documents could set off alarms in Congress over whether Toyota put profits ahead of customer safety and pushed regulators to narrow the scope of recalls.

The memo, from July 2009, observed that Toyota faced a challenge from an “activist Administration and Congress.” has posted part of the document here.

Under the heading “Key Safety Issues,” the memo lists the following bulletpoints:

  • U.S. DOT/NHTSA under Obama Administration not industry friendly
  • OEMs [origina equipment manufacturers] anticipate a more challenging regulatory and enforcement environment, with a potential for revisiting key regulatory proposals
  • NHTSA’s new, more aggressive management includes more attorneys at the agency, even in the leadership of Rulemaking and Enforcement
  • The new team has less understanding of engineering issues and are primarily focused on legal issues.

And Toyota wasn’t the only one taking notice of issues with unintended acceleration well before the recent recall. Again, from the Associated Press report:

Separately, the government said Sunday it was already investigating reports of sudden acceleration in Toyota vehicles when the nation’s largest auto insurer shared complaints about the issue.

The Transportation Department released documents showing that in December 2003 it began investigating 39 complaints of sudden acceleration involving 2002-03 Toyota Camry sedans. That was about three months before State Farm shared with NHTSA complaints of sudden acceleration in 2003-04 Lexus ES300s and 2002-04 Camrys.

And today, as reported in the Wall Street Journal, Toyota confirmed that it has received subpoenas from both the Securities and Exchange Commission and a federal grand jury in the Southern District of New York.