In 2010, Toyota was plagued by a number of forced recalls of its vehicles, the most notorious of which was the unintended acceleration of its vehicles and its failure to notify both the US Government and consumers. Recalls and Lawsuits mounted. Toyota faced a $16.4 Million dollar fine in April 5, 2010 and had two weeks to comply or fight.
On Dec 26, 2012, Toyota announced that it would spend $1.1 billion USD to settle a class action suit in the US that represented owners of millions of recalled vehicles.
The payments would go to both the current and former owners for the loss of value on the vehicles that were recalled, due to both faulty floor mats and other conditions that might have caused the unintended acceleration.
Toyota is also going to fix up 3.2 million vehicles that were affected with floor-mat problems by installing a special safety system.
In total, Toyota has recalled as many as 8 million cars and trucks in the US because of floor mat problems and sticky accelerator problems.
There was a theory that the electronic system might be at fault, causing the unintended acceleration but the National Highway Traffic Safety Administration did not find evidence to support this assumption.
Toyota will need to take a $1.1 billion charge against earnings in the next quarter to cover the costs.
The $16.4 Million USD fine paid to the US Government is dwarfed by this latest cost to the company.
If an organization needs to measure the cost of poor customer satisfaction, Toyota is the poster child of how it can impact the bottom line directly.