U.S. seeks $16.4 million fine against Toyota

NEW YORK (CNNMoney.com) -- The Department of Transportation's National Highway Traffic Safety Administration is seeking the maximum fine of $16.4 million against Toyota Motor Corp. for failing to notify the agency of a "sticky pedal" defect in its cars for at least four months.

Under federal regulations, automakers are required to inform the agency within five days of determining that a safety defect exists in one of its products.

NHTSA learned, through documents obtained from Toyota (TM), that the automaker knew of sticky gas pedal problems since at least September, 2009, the agency said in an press release.

"We now have proof that Toyota failed to live up to its legal obligations," said Transportation Secretary Ray LaHood. "Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families. For those reasons, we are seeking the maximum penalty possible under current laws."

NHTSA is still investigating to see if Toyota committed any additional violations that may warrant more penalties, the agency said. Under federal regulations, $16.4 million is the most an automaker can be fined for a single violation.

Toyota said it has not received a letter from the NHTSA about the fine, but responded to the announcement by saying the company has begun to address the agency's concerns.

"We have already taken a number of important steps to improve our communications with regulators and customers on safety-related matters as part of our strengthened overall commitment to quality assurance," the company said in a statement. "These include the appointment of a new Chief Quality Officer for North America and a greater role for the region in making safety-related decisions."

Toyota cars and trucks have been the subject of at least three separate major recalls in the past year. One was for the "sticky pedal" situation in which gas pedals, as they age, begin to stick in a partially depressed position. Another was for gas pedals that can stick on some floor mats and a third was for braking problems on Toyota Prius hybrid cars.

The biggest fine that's ever been levied was just $1 million taken from General Motors in 2004 for failing to deal promptly with a windshield wiper issue, an amount that was negotiated down from the $3 million NHTSA originally asked for.

Toyota could challenge the penalty and question how the NHTSA determined the record amount, especially since the difference between Toyota's and GM's fines is so large, said senior analyst Jessica Caldwell of automotive Web site Edmunds.com.

"It'll be interesting to see how Toyota responds," she said. "But $16.4 million is a drop in the bucket of cash Toyota has, so they might just find it easier to pay and avoid a bigger news story."

It also strikes experts as odd that regulators would seek the maximum penalty in a case in which the specific defect involved resulted in no serious crashes, injuries or deaths. "I see this as politically motivated," said Ed Higgins, a Michigan attorney with the law firm of Plunkett Cooney who has worked with automakers in defect cases. "NHTSA is under a lot of political pressure to get tough."

In documents filed with NHTSA, Toyota has indicated that it did not originally believe the sticky gas pedals were a genuine safety issue. At worst the pedals got stuck only an inch or so down resulting in a situation the driver could easily control using the brakes.

That belief gives Toyota a ready defense, Higgins said. The regulations state that the automaker has five days from the time it determines a safety-related defect exists to report it. If Toyota didn't see this as safety related, Higgins said, the clock wasn't running.

There were injuries and deaths alleged to result from a separate issue in which gas pedals could become stuck on floor mats. NHTSA has not announced a fine in that recall.