Did Toyota Violate Its Deal with the US Department of Justice?

THE GIST

Toyota was charged with wire fraud, paid a $1.2 billion fine, and entered a deferred prosecution agreement with the United States Department of Justice on March 19, 2014 for the companies illegal conduct during its Unintended Acceleration scandal.

In the Acceptance of Responsibility section of the Deferred Prosecution Agreement, or DPA, Toyota agreed that, “In sum, Toyota admits to have misled U.S. consumers by concealing and making deceptive statements about to safety related issues affecting its vehicles, each of which caused a type of Unintended Acceleration.”

The Statement of Facts from the Deferred Prosecution Agreement citied an email exchanged by Toyota employees expressing their attitude toward launching a safety recall regarding Unintended Acceleration:

The deferred prosecution agreement stipulated that Toyota would have a three-year probationary period ending around March 2017 - during which the manufacturer agreed to refrain from illegal activities or risk criminal prosecution. No criminal prosecution of Toyota executives has occurred.

Below is an examination of Toyota’s conduct pertaining to potential defects in braking systems of generation II and III Prius vehicles and defects in its Prius inverters, Rav4 rear suspension arms, and passenger airbags during the probationary period of the Toyota’s deferred prosecution agreement with the United States Department of Justice.

 

 

MARCH 2014 – MARCH 2017

Potentially Defective Prius Braking Systems

(Brake Boost Pump Assemblies, Brake Master Cylinder Assemblies, and Brake Actuator Assemblies)

 

Despite many complaints regarding the brakes in 2010-2015 generation III Prius vehicles – including those on NHTSA’s safercar.gov website detailing crashes and injuries - only a certain number 2010 model year Prius vehicles have been subject to a safety recall addressing a defect in the brakes. Toyota issued safety recall A0B in February 2010 covering approximately 133,000 2010 Prius vehicles and safety recall D0H in June 2013 covering about 82,000 2010 Prius vehicles. However, Toyota has not acknowledged a safety defect regarding the brakes in some model year 2010s and has not acknowledged a safety defect in any 2011 – 2015 model year generation III Prius vehicles.

Currently, NHTSA’s safercar.gov website contains over 1800 complaints pertaining to the brake system in 2010-2015 generation III Prius vehicles. Of these 1800 complaints, at least 42 of complaints include “crashes” detailing at least 17 injuries . At least 31 of these crashes and 10 of these injuries occurred or were reported to NHTSA while Toyota was under the probationary period of its deferred prosecution agreement with the United States Department of Justice for its illegal conduct during the Unintended Acceleration scandal.

Stories describing similar brake malfunctions in generation II Prius vehicles are also plentiful online. Despite many complaints regarding the brakes 2004-2009 generation II Prius vehicles – including over 1200 on NHTSA’s safercar.gov website – Toyota has never acknowledged a safety defect in generation II Prius vehicles. NHTSA’s safercar.gov website contains complaints detailing at least 35 crashes and 22 injuries classified under brake-related categories. At least 12 of the crashes and 8 of the injuries occurred or were reported to NHTSA during the probationary period of Toyota’s deferred prosecution agreement with the United States Department of Justice.

Toyota has never conducted a safety recall to prevent these types of brake issues in generation II Prius vehicles. In August 2016 while Toyota was still under the probationary period of the deferred prosecution agreement, and when many of the covered models were over a decade old, they issued Warranty Enhancement ZG1. ZG1 covers “internal malfunctions of the Brake Actuator assembly” for about 736,000 vehicles including generation II Prius, Highlander Hybrids, and nearly 200,000 Lexus vehicles.  Toyota’s ZG1 warranty enhancement expired on December 31, 2017. After expiration the owner of a generation II Prius that experiences an “internal malfunction of the brake actuator assembly” has no enhanced warranty coverage. Toyota may also refuse to reimburse Prius owners if they apply to be paid back for covering the expensive brake repair out of pocket years ago.

Safety recalls are legally required to prevent a dangerous defect from occurring. Warranty Enhancements require the failure to occur prior to receiving replacement parts.

According to the National Highway Traffic Safety Administration’s Compendium, “Manufacturers of motor vehicles and motor vehicle equipment are responsible under U.S. law for both notifying NHTSA and conducting a safety recall campaign when they discover a safety related defect…in motor vehicles or equipment that they manufacture.” NHTSA’s Compendium continues to define “Motor Vehicle Safety” as, “the performance of motor vehicles or items of motor vehicle equipment in such a manner that the public is protected against unreasonable risk of accidents occurring as a result of the design, construction, or performance of motor vehicles…”

You can read more about potentially defect brake systems in generation II and generation III Prius vehicles here.

AUGUST 2016

Toyota’s Defective, Rust-Prone Suspension Arm and the G0V Safety Recall

 The tube-style rear suspension arm no. 1 on certain 2006 – 2011 Rav4 has been subject to three separate recalls – Toyota’s C0J (NHTSA ID 12V-373), CSJ (NHTSA ID 13V-383), and G0V (NHTSA ID 16V-596) safety recalls.

The defect information report for the third safety recall, G0V, was submitted to the National Highway and Traffic Safety Administration on August 12, 2016 while Toyota was under the three-year probationary period of its deferred prosecution agreement with the US Department of Justice.

Toyota’s questionable activities regarding the G0V safety recall pertain to three main issues:

 

  1. Excluding from the G0V safety recall Rav4 owners with potentially rusting mounting hardware
  2. G0V’s epoxy “remedy” creates a new defect on the covered Rav4s – the inability to have a rear wheel toe adjustment
  3. The inclusion of a Rav4 population manufactured with a cam-style rear suspension arm

 

Excluding Rav4s with Potentially Rusting Mounting Hardware

Separations and failures of the rear suspension arm no.1 continued to occur even after having Toyota’s second safety recall for the defective tube-style rear suspension arms - the CSJ safety recall - completed. On August 12, 2016 Toyota filed the defect information report for the G0V safety recall with the National Highway and Traffic Safety Administration.

Toyota’s CSJ safety recall (NHTSA ID 13V-383) covered a population of approximately 760,000 Rav4 vehicles. The CSJ safety recall “remedy” included an “epoxy” encasement designed to prevent moisture from entering the rust-prone suspension arm and leaving it susceptible to separation.

The technical instructions of CSJ also included an “inspection” of the mounting hardware bolts for the rear suspension arms as they may have also been rusted, pitted, or corroded. Replacement of the mounting hardware, including the bolt, was not mandatory for the 760,000 Rav4 covered by the CSJ safety recall.

In the defect information report for G0V - filed because suspension arms continued to pose dangers after completion of the CSJ recall - Toyota states, “Toyota reviewed VOQs provided by the Agency, alleging arm separation and identified that the cases primarily related to corrosion of the arm mounting bolts…”

Instead of including all Rav4 vehicles that had not had their mounting hardware replaced under the prior two safety recalls, Toyota determined the population of the G0V safety recall based solely on which had their suspension arms replaced. Therefore, many Rav4 vehicles with potentially dangerous mounting hardware were excluded from the G0V safety recall population.

Toyota had covered approximately 760,000 Rav4 vehicles in the CSJ safety recall. The population of Rav4 covered by G0V was reduced by approximately 400,000 to 329,000 vehicles.

Furthermore, the initial “remedy” instructions for the G0V safety recall did not call for a mandatory replacement of the mounting hardware for the approximately 300,000 Rav4s that were covered. Toyota would later acknowledge that the mere “inspection” of the mounting hardware called for by the initial instructions for G0V was not adequate. The technical instructions were updated – ordering the technicians performing the “remedy” to mandatorily replace the mounting bolt and nut.

However, Toyota did not notify Rav4 owners who had the G0V remedy completed prior to the update of the instructions that the “remedy” procedure had been changed to include a mandatory replacement of their mounting hardware. Toyota also did not notify the excluded population of Rav4 owners who had CSJ completed that the new G0V remedy called for the mandatory replacement of the rear suspension arm mounting hardware.

 

The G0V Epoxy “Remedy” Creates a New Defect

 Tube-style rear suspension arms on 2006-2011 Toyota Rav4s covered by the G0V safety recall were designed to allow a rear wheel toe adjustment – a critical component of rear wheel alignments. The epoxy “remedy” called for by Toyota’s CSJ and G0V safety recalls eliminates the rear toe adjustment capability. Toyota’s released Technical Service Bulletin 0042-14 entitled “Rear Suspension Toe Adjustment Out of Specification After SR CSJ” addressing the safety recall’s elimination of the rear wheel toe adjustment.

The TSB explains that if a rear toe adjustment is needed, the existing epoxied suspension arms must be replaced with new ones and the epoxy “remedy” must be done over again on the vehicle. Surprisingly, if the vehicle is outside of the factory warranty Toyota requires the customer pay for the new epoxied tube-style rear suspension arms.

A rear wheel alignment typically costs less than $100. Re-doing the epoxy “remedy” procedure includes paying for the new, defective tube-style rear suspension arms and can cost customers around $650. When a customer cannot afford the repair or refuses the service the Rav4 can be left with potentially dangerous, misaligned wheels.

In Toyota’s defect information report for the G0V safety recall, which was filed during the probationary period of their deferred prosecution agreement with the US Department of Justice, a Toyota employee stated that, “Toyota reviewed VOQs provided by the Agency, alleging arm separation, and identified that the cases primarily related to…an inability of the customer to have a rear wheel alignment.”

Even though Toyota admitted in its defect information report for G0V that an inability to have a rear wheel alignment was the cause of many consumer complaints to NHTSA, it still employed the very “epoxy” procedure used in the CSJ safety recall that eliminates the ability to have a complete rear wheel alignment done as the G0V “remedy.”

 

Inclusion of the Cam-Style Rear Suspension Arms in Safety Recall G0V

In the defect information report for Toyota’s C0J safety recall – the first addressing the defective tube-style rear suspension arms in certain Rav4 vehicles – Toyota stated, “In August 2010 a new arm was introduced…” during the manufacturing of Rav4 vehicles. Toyota is referencing the “cam-style” rear suspension arm which replaced the defective “tube-style” rear suspension arm during production.

The cam-style rear suspension arm no. 1 installed on Rav4 vehicles manufactured after Toyota’s August 2010 parts change has a much different design than its defective tube-style predecessor. The cam-style rear suspension arm does not have the turn buckle or adjusting lock nuts that make the tube-style rear suspension arm susceptible to rust and corrosion.

Even though cam-style rear suspension arms do not have the components that Toyota cites as the cause of the safety defect addressed by G0V, Toyota included a number of cam-style Rav4 vehicles in the GOV safety recall.

While Toyota included some cam-style rear suspension arms in the G0V safety recall in August 2016, technicians were instructed to never complete the G0V epoxy procedure “remedy” on a cam-style rear suspension arm. The technical instructions for the G0V safety recall only call for an “inspection of the cam-style arm. Toyota never requires a replacement or epoxy of a cam-style rear suspension arm.

In fact, the epoxy mold utilized in G0V safety recall “remedy” procedure was not designed to fit to the cam-style rear suspension arm. It does not have the turn buckle the epoxy mold was designed to fit. No cam-style Rav4 vehicle ever had anything more than an “inspection” performed.

During its Sudden Unintended Acceleration scandal, Toyota admitted that it avoided announcing a safety related parts change on its pedals to regulators because it would “most likely mislead the concerned authorities and consumers and such to believe that we have admitted having defective vehicles.”

The US Department of Justice’s Statement of Facts pertaining to Toyota’s Unintended Acceleration scandal states, “Although TOYOTA is not required to notify NHTSA of any engineering and design changes it made to Toyota and Lexus models sold in the United States, it is required to file a DIR (defect information report) for any safety-related defect addressed by such an engineering and/or design change.”

There is no defect information report available on NHTSA’s safercar.gov website disclosing a safety related parts change from the tube-style rear suspension arm to the cam-style rear suspension arm.

You can read more about Toyota’s actions related to the defective rear suspension arms here.

 

JANUARY 2015

Refusal to Acknowledge Potential Passenger Airbag Non-Deployment as a Safety Defect

 United States law requires that a manufacturer notify the National Highway and Traffic Safety Administration within five (5) days of becoming aware of a safety defect in its vehicles. If Toyota does not acknowledge a defect as safety-related the manufacturer uses other campaign classifications to address the defect. One such classification used by Toyota is the “Limited Service Campaign.”

Safety recalls are subject to federal regulations. When Toyota decides a defect does not present an unreasonable risk to safety and utilizes a different campaign classification, such as their Limited Service Campaign, the action is not subject to the same level of federal oversight as a safety recall.

For example, safety recalls require the submission of a written defect information report explaining the defect’s origins and chronology, the supplier of the defective component, other vehicles that may be susceptible to the same defect, and disclosure of the “remedy” that will cure the defect be filed with the National Highway and Traffic Administration. Safety recalls are also subject to federal campaign completion rate and owner re-notification requirements. Toyota’s Limited Service Campaigns are not subject to these federal requirements.

Toyota’s Limited Service Campaign classification is also unique from a safety recall in another way – Toyota assigns expiration dates to them.

If a vehicle is presented to a dealer within the applicable timeframe as defined by Toyota, Toyota will cover the cost of fixing the defect. If an owner presents the vehicle to a dealer one day after Toyota’s designated expiration date, Toyota will no longer cover the cost of fixing the defect.

In early 2015, while in the probationary period of its deferred prosecution agreement with the US Department of Justice for the unintended acceleration scandal, Toyota acknowledged a defect in passenger airbags in approximately 750,000 vehicles including popular models like the Camry and Prius C. Toyota’s documentation describes the condition as follows:

“…the system may interpret certain occupant seating usages or road conditions as a rear collision and illuminate the Airbag Warning Light and “AIR BAG OFF” indicator, disabling the front passenger air bag.”

Instead of acknowledging the potential non-deployment of the passenger airbag during an accident as an unreasonable risk to safety and issuing a safety recall, Toyota addressed the defect with Limited Service Campaign F0B. No defect information report was ever filed with the National Highway and Safety Administration, the federal completion rate requirements were avoided, and the federal owner re-notification requirements do not apply.

Toyota assigned the expiration date of December 31, 2017 to the F0B Limited Service Campaign. If an owner presents an affected vehicle to a dealership today - Toyota will refuse to cover the cost of repairing the potentially defective passenger airbag.

Other manufacturers that have experienced similar airbag non-deployment defects have announced safety recalls. You can read about Nissan’s airbag safety recall here. You can read about Chevy’s airbag recall here.

To read more about the potential mis-classification of this defect and others click here.

 

AUGUST 2014

Defective Prius Inverters, the Dangers of Limp-Home Mode, and Failed Safety Recall Remedies

 Toyota’s inverter is the electrical choreographer for the manufacturer’s hybrid technology. According to Ralph Vartabedian of the Los Angeles Times, “The inverter boosts the battery's 200 volts to about 500 volts to drive two electric motors, and converts the electricity from direct current to alternating current (similar to what comes out of a household outlet). When the car brakes are applied, the power flow reverses to charge the battery.”

Since their introduction to the American market Toyota’s Hybrid Inverters have been plagued by problems including a history of safety recalls on the well-known Prius and Highlander Hybrid vehicles.

In February 2014, just prior to entering the probationary period of their deferred prosecution agreement with the US Department of Justice, Toyota filed a Defect Information Report with the National Highway and Traffic Administration and announced safety recall E0E for approximately 750,000 Prius Liftbacks.

Toyota issued safety recall E0E (NHTSA ID 14V-053) on the Prius inverters because heat damage to transistors can cause the Prius’ inverter to fail. The Prius either shut down or go into limp-home mode. Toyota represented an $80 “software update” – not a new Inverter costing approximately $3,000 a piece - would be the cure for the dangerous failures.

Toyota’s February 2014 defect information report submitted to the National Highway Traffic and Safety Administration disclosed that the inverter failure limp-home mode would cause a loss of vehicle power. The report did not disclose that Prius vehicles experiencing an inverter failure would most likely experience loss or degradation of the anti-lock brakes, brake assist, vehicle stability control, traction control, power steering assist, and other systems while the power loss is occurring. Instead, the company only made a vague reference to warning lamps illuminating on the dashboard. Warning lamps historically indicate a loss or degradation of the system they represent.

Two lawsuits against Toyota allege that the low-cost software update “remedy” did not cure the safety defect and that thousands of inverter failures have taken place after the update had been completed – some on freeways. The lawsuits also assert that instead of admitting the $80 software update “remedy” was not adequate, filing another defect information report with NHTSA, and issuing a supplemental safety recall that would prevent inverter failures, Toyota instead announced Warranty Enhancement ZE3 in August 2014.

A safety recall is legally required to prevent a dangerous inverter failure from occurring. A warranty enhancement, also referred to as a Customer Support Program by Toyota - is a reactionary repair that takes place after the dangerous inverter failure has already occurred. By electing to use a reactionary warranty enhancement to address dangerous Prius inverters, Toyota is waiting for the potentially life-threatening inverter failure to occur before covering the cost of the repair.

The customer notification letters for the ZE3 warranty enhancement also omit specific mention of the frequent loss of anti-lock brakes, brake assist, vehicle stability control, traction control, and power steering assist during inverter failure limp-home mode.

Prius V models later began experiencing similar inverter failures while Toyota was under the probationary period of the deferred prosecution agreement. Even though Toyota was aware Prius Liftback inverters were failing after the E0E software update “remedy” was completed, the manufacturer again chose to represent an $80 software update as the cure for the defective inverters in safety recall F0R.

The defect information report for the F0R safety recall was filed with the National Highway and Traffic Safety Administration in July 2015 – while Toyota was under the probationary period of its deferred prosecution agreement. It omits mention of the frequent loss or degradation of the anti-lock brakes, brake assist, vehicle stability control, traction control, power steering assist, or other systems during limp-home mode.

Not surprisingly, the inverters on Prius V vehicles covered by the F0R safety recall continued to fail after the software update “remedy” had been completed. Again, Toyota announced a warranty enhancement (ZF5) instead of issuing a supplemental recall that would prevent the dangerous inverter failures from occurring.

The customer notifications for the ZF5 warranty enhancement – sent while Toyota was under the probationary period of its deferred prosecution agreement - also lack specific mention of the frequent loss or degradation of the anti-lock brakes, brake assist, vehicle stability control, traction control, power steering assist, or other systems during inverter failure limp-home mode.

You can read more about Toyota’s defective inverter here.