Toyota boosts incentives as vulnerability in court grows

A component goes into a Camry at Toyota's factory in Georgetown, Ky. Camry models are included in the incentive programs. JAMES CRISP / AP Enlarge

Toyota Motor Corp. will continue to offer most of its heavy incentives throughout April after the deals helped lift its sales more than 40 percent last month, the automaker said Tuesday.

Meanwhile, legal experts said the company may have a tough time defending itself in U.S. lawsuits over flaws in its vehicles after U.S. Transportation Secretary Ray LaHood said this week that the company "knowingly hid a dangerous defect."

Toyota will continue to offer cheap leases on up to eight of its most popular models, including the Camry, Corolla, and RAV4. It is scaling back its zero-percent financing offers to six vehicles from eight but is expanding a popular two-year free maintenance program to all customers.

The maintenance program was limited to return customers in March.

The promotions run through May 3, Toyota said.

Unlike U.S. automakers, Toyota has typically shied away from heavy incentive programs, because of their cost and potential brand damage over the long term. But Toyota began a series of pro-motions last month as it sought to recover from massive safety-related recalls this year.

The incentives were extended a day after the Department of Transportation said it will fine Toyota $16.4 million for hiding a product defect and failing to quickly alert regulators to safety problems in some of its vehicles.

The National Highway Traffic Safety Administration found this week that Toyota failed to act in a timely manner after knowing of the problem since at least September, 2009.

Carl Tobias, a professor at the University of Richmond law school, said that will be useful for plaintiffs in lawsuits even if it won't be admitted as evidence in trials.

"It's something that plaintiffs' lawyers can capitalize on in settlement negotiations or in asking judges for broader discovery," he said. In seeking company documents, "they could point to the government's finding," he said.

Toyota faces at least 177 suits seeking class-action, or group, status and at least 56 individual suits over sudden acceleration.

The assessment by Mr. LaHood and the safety agency won't be admitted directly as evidence in trials against the company, said W. Mark Lanier, a Houston lawyer who has filed class-action and individual lawsuits related to the claims.

"It's not like a criminal finding in that there was due process," he said. "The underlying facts that prompted the fine will come into evidence."

The proposed fine may be admitted to rebut any assertions by Toyota that the government never found anything wrong with its vehicles, he said.

It won't be allowed in a personal-injury suit because it's irrelevant to the cause of a particular accident, he said.

But Mr. LaHood's evaluation that Toyota hid a defect would be admissible in lawsuits brought by investors claiming the carmaker failed to disclose material information, driving down the value of company shares, the lawyer said.

The class actions typically include allegations that Toyota deceived consumers by withholding information about problems that could cause sudden acceleration or misrepresenting the safety of the vehicles. Most allege fraud or deceptive trade practices.

Toyota has recalled more than 8 million vehicles around the world - about 6 million of them in the United States - because of acceleration problems in several models and braking issues in the Prius hybrid.

The incentives Toyota announced last month helped lift demand after sales fell in February. Last week, the company said U.S. sales in March soared 41 percent, outpacing the broader auto industry and putting it about 1,000 vehicles short of outselling General Motors Co.