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Accounting for Toyota’s Recalls*“According to the U.S. Transportation Department, over the past decade through the end of February,the number of deaths linked to sudden acceleration in Toyota vehicles has increased to 52.”1Despite a long-term strategy of building quality into their vehicles (Exhibit 1), Toyota ended thefirst decade of the twenty-first century mired in controversy and legal claims related toallegations of unintended sudden acceleration. In mid-September 2009, Toyota Motor SalesUSA ordered its dealers in the United States to inspect floormats in all of their cars after a highspeed traffic accident in late August 2009 killed a California Highway Patrol Officer and threemembers of his family (Exhibit 2). Unintended acceleration caused by an incorrect ormisaligned floormat was suspected. Exhibit 3 summarizes subsequent events. By lateSeptember, Toyota urged approximately 4 million Toyota and Lexus owners to remove thedriver’s side floor mat. About a month later, investigators turned their attention to the design ofthe accelerator pedal. In a press briefing on November 2, 2009 Toyota Group Vice President andGeneral Manager Bob Carter “categorically denied claims like those in [an] ABC Newsinvestigation into the situation wherein owners are claiming electrical or mechanical faults led tounintended acceleration.”2On November 16, 2009, Japanese media reported that Toyota had made a deal with the U.S.National Highway Traffic Safety Administration (NHTSA) over a recall. Toyota denied anyagreement had been reached, but the company admitted it had already “set aside” 5.6 billion todeal with the issue.3 By late November 2009, Toyota had recalled over four million vehicles inthe U.S. to address the risk that floormats could come loose and trap the accelerator pedal(Exhibit 4).On January 16, 2010, Toyota notified the NHTSA that accelerator pedals made by its supplierCTS Corp might have a dangerous "sticking" defect. Five days later, Toyota announced a recallof over 2 million vehicles related to sticking pedals (Exhibit 5). Days later, at the urging of theNTHSA, Toyota (i) halted U.S. sales of eight models involved in the recall, including its bestselling Camry and Corolla sedans, and (ii) recalled an additional 1.1 million vehicles due to the*123This case was prepared from publicly available data for class discussion purposes by Robert M. Bowen and JaneJollineau Kennedy of the Foster School of Business at the University of Washington. The comments of FrankHodge and D. Shores are appreciated. May 26, 2010.TradingMarkets.com, March 2, 2010. See http://www.tradingmarkets.com/news/stock-alert/tm toyota-crisis-atotal-recall-816622.html.See n-new-models-and-competition s/story?id 8980479Motor Trend, Wide Open Throttle, November 16, 2009. See ls-on-eight-models/index.html.
Accounting for Toyota’s Recallspage 2risk that a loose floormat could trap the accelerator in an open position. This added to the recallof 4.2 million vehicles announced in late November 2009.Financial impact of the recallsOn January 27, 2010, Automotive News estimated that Toyota dealers could lose as much as 1.5million in profit every week of the sales “freeze.” Toyota notified NHTSA late in the day that itwould expand its late November recall to cover an additional 1.1 million vehicles.Largely as a result of weeks of bad press, Toyota sales in January 2010 fell 16% from the yearearlier to levels not experienced in the prior decade. Toyota’s stock price fell approximately10% overall and about 30% relative to the S&P 500 over the period from early September 2009through April 2010 (Exhibit 6). In contrast, Ford Motor Company’s stock price grew 80% overthe same period, suggesting that at least some competitors benefited from Toyota’s problems(Exhibit 7).On March 9, 2010, The Wall Street Journal reported that the financial impact on Toyota couldexceed 5 billion over the next fiscal year, including litigation costs, warranty costs, increasedmarketing and incentive campaigns to countervail the negative publicity surrounding the claims ofunintended acceleration. For example, in early 2010, Toyota featured “a 0% interest five-year loanoffer, competitive lease prices and free maintenance across 80% of its vehicle line-up.”4 WhileToyota had already estimated a recall cost of about 2 billion (180 billion yen) for the currentfiscal year, analysts estimated future costs to be much higher, including J.P. Morgan’s estimate of 5.5 billion (500 billion yen). Despite having an approximate 29 billion in cash and little debt,“ratings agency Fitch placed the company's 'A ' rating on negative watch. Fitch said the recall andsales suspension casts a negative light on Toyota's reputation for quality. A reduction in acompany's credit rating can make it more expensive for it to raise money in the debt market.”5On April 19, 2010, Toyota confirmed it would pay a 16.4 million fine by the NHTSA related todelaying the recall of vehicles experiencing sticking accelerator pedals. Toyota denied anywrongdoing but elected to pay the fine, the largest amount allowed under U.S. federal law.On May 11, 2010, Toyota reported a 1.2 billion profit for the fourth fiscal quarter and 2.2 billionfor the fiscal year ended March 31, 2010, despite revealing that it had spent 1.1 billion onrecalling 8 million vehicles and had lost about 800 million in sales worldwide. Toyota reported a 233 million operating loss for its North America region – down from a 1.9 billion loss in thesame quarter of 2009. Management expressed optimism and forecasted net income of 3.4 billionfor fiscal 2011.6456“Toyota’s Recall Costs Could Top 5 Billion,” The Wall Street Journal, 3/9/10.Ibid“Toyota Announces Year-End Financial Results” Toyota Investor Relations, 1 1.html
Accounting for Toyota’s Recallspage 3Accounting for warranty provisions and contingent liabilitiesThroughout the recall crisis, the financial community looked to Toyota management forguidance on the magnitude and duration of its effects. However, Toyota’s May 11announcement of fiscal 2010 financial results was thin on details.A difficult challenge for any accounting system is reporting events that have important butuncertain outcomes such as the events surrounding the ultimate recall of millions of Toyotaand Lexus vehicles in late 2009 and early 2010. Uncertainty related to the recalls includedcurrent and future warranty costs, as well as potential litigation settlement costs. Of thesecosts, past warranty costs are observable and future warranty costs were likely relativelystraightforward to forecast. Toyota management knew the number of recalled vehicles, theapproximate cost to repair each vehicle and the number of vehicles yet to be repaired. Withthis information, management estimated incremental warranty expense and the associatedliability related to the recalls.The accounting entry increased warranty expense, which lowered net income for the period,and increased liabilities for the estimated future warranty work. The liability is reduced asrepairs are completed.More difficult to predict were future costs to settle litigation surrounding the accidents andevents leading to the recalls. Such predictions tend to be highly subjective and only result in areported (contingent) liability under certain conditions. Further complicating the situation wasthat accounting for contingencies under U.S. GAAP was in a state of flux at yearend 2009 andboth the U.S. and Japan were discussing the transition to International Financial ReportingStandards (IFRS) and its materially different approach to reporting contingent liabilities(summarized in Exhibit 8).7At stake was how to report the estimated future implications of Toyota’s recalls on theCompany’s financial statements (or whether to report anything at all). Not surprisingly,different constituencies tended to hold different positions on what the best accounting shouldbe. Preparers and auditors tended to support current U.S. GAAP while consumers of financialdata (investors and analysts) tended to be critical of current U.S. GAAP and preferred moredisclosure and recognition of uncertain contingent liabilities.Management’s dilemmaAs fiscal yearend 2010 approached, Toyota management had an expensive recall campaignunder way and was dealing aggressively with public relations challenges.Toyota and its president, Akio Toyoda, have embarked on a media offensive, after being criticized forits slow response to the burgeoning crisis. Mr. Toyoda last week aimed to rally the troops by speakingin front of thousands of Toyota dealers, suppliers and management. On Monday, he met with YukioHatoyama, Japan's prime minister, to discuss his testimony before U.S. Congress and his visit toChina.7Both U.S. and Japanese accounting standards were converging to IFRS. 0144feab49a.html.
Accounting for Toyota’s Recallspage 4The car maker also lashed out against ABC News, alleging the broadcaster staged part of a report onFeb. 22 that purported to show electronic problems could cause Toyota vehicles to accelerateunexpectedly.The attack on ABC was part of what the Japanese car maker has called a broader push to rebut criticsand win support for its view that the electronics in its vehicles are not defective.In addition to the public relations offensive, management had to (i) decide how to report theevents of the past six months in its annual report to the company’s shareholders, and (ii)determine how reporting might differ if IFRS were used instead of U.S. GAAP,8 and (iii)address the lingering question was how they could have done a better job of responding to theevents surrounding the allegations of sudden acceleration.8Again, Exhibit 8 summarizes IFRS rules on contingent liabilities and contrasts differences between IFRS andcurrent U.S. GAAP.
Accounting for Toyota’s Recallspage 5Case questions:1. Managers of manufacturing firms report estimated warranty provisions in their periodicfinancial statements. Would historical models be useful in making Toyota’s fiscal 2010estimate? Why or why not?2. Assuming the cost to address the 8 million recalled vehicles world wide was estimated toaverage 600 per vehicle, prepare an initial journal entry to record Toyota’s warranty costsrelated to the fiscal 2010 recalls. Assuming 2 million vehicles had been repaired by fiscalyearend 2010, what would be the magnitude of the liability at March 31, 2010? Assumingyou were senior management at Toyota, would you have tended to under or overestimateyour forecast of these warranty costs? Why?3. Current U.S. GAAP uses the terms “probable,” “reasonably possible” and “remote” todescribe the likelihood of future events such as litigation claims. Using probabilitiesranging from 0% to 100%, what does each term mean to you? (Don’t worry, there is nosingle correct answer to this question.)4. How would the likelihood of a loss/liability and an estimate of the magnitude of thatloss/liability be different on September 30, 2009 as compared to January 31, 2010? (Aqualitative response is fine; no numbers are necessary.)5. Would investors want Toyota’s management to disclose and estimate contingent liabilitiesassociated with sudden acceleration claims? Why or why not?6. How would Toyota’s contingent liabilities associated with sudden acceleration claims bereported under (a) current U.S. GAAP and (b) IFRS?7. Taking an investor perspective, which reporting regime would you prefer and why: (a)current U.S. GAAP or (b) IFRS?8. Taking the perspective of Toyota senior management, which reporting regime would youprefer and why: (a) current U.S. GAAP or (b) IFRS?9. Taking the perspective of Toyota’s auditors, which reporting regime would you prefer andwhy: (a) current U.S. GAAP or (b) IFRS?10. How should Toyota account for the loss of sales, market share and reputation from theseadverse events?
Accounting for Toyota’s Recallspage 6Exhibit 1“Toyota Traditions: Building Quality into Processes”Source: http://www2.toyota.co.jp/en/vision/traditions/sep oct 05.html
Accounting for Toyota’s Recallspage 7Exhibit 2Lexus 350 crash caused by sudden accelerationAugust 28, 2009: Off-duty California Highway Patrol officer Mark Saylor istraveling on Highway 125 in Santee, California (northeast of San Diego), withthree family members, when the 2009 Lexus ES350 he is driving suddenlyaccelerates out of control, hits another car, tumbles down an embankment andcatches fire. While the car is careening down the highway at speeds estimated toexceed 100 mph, one of the occupants calls 911 and reports that the car has "nobrakes." The call ends with the sound of a crash. All four people in the vehicleare killed. The vehicle was a loaner from a local Lexus dealer.Sources: MSNBC.com, Google search
Accounting for Toyota’s Recallspage 8Exhibit 3Timeline of events relating to allegations of sudden acceleration in Toyota vehiclesBelow are milestones leading to the largest recall in Toyota's history: August 28, 2009: An off-duty California Highway Patrol officer is driving on a highway northeast ofSan Diego with three family members when the 2009 Lexus ES350 suddenly accelerates out ofcontrol, hits another car, tumbles down an embankment and catches fire. As the Lexus reachesspeeds estimated to exceed 100 mph, one of the occupants calls 911 and reports that the car has "nobrakes." All four are killed in the ensuing crash. September 14, 2009: Preliminary reports from Toyota and local authorities indicate that the Lexus,which had been on loan from Bob Baker Lexus of San Diego, where Saylor's personal Lexus vehiclewas being serviced, may have had the wrong floor mats installed, interfering with the gas pedal. September 29, 2009: Toyota announces floor-mat “customer safety advisory,” saying the floor matscan become entangled with the accelerator and cause it to stick. The company advises people toremove the floor mats from their cars and says it will provide “safe” replacements. October 2, 2009: Newly installed Toyota CEO Akio Toyoda publically apologizes to the Saylorfamily members killed in the accident and to every customer affected by the recall. October 18, 2009: The Los Angeles Times publishes the first of several stories concerning claims ofunintended acceleration in Toyota vehicles. The Times article reveals there have been nine separateNHTSA investigations into claims of unintended acceleration by Toyota vehicles in the past decade.Two involved floor mats, and one a trim piece on the Toyota Sienna minivan. Six were dismissed dueto lack of evidence. The Times story also claims at least five unintended acceleration cases involvingToyota products in the past two years had resulted in fatalities and that "hundreds" of complaints hadbeen filed with the federal government. October 25, 2009: The results of an investigation by local authorities and the National HighwayTraffic Safety Administration (NHTSA) reveal a set of rubber floor mats designed for the Lexus RX400 SUV had been placed over the top of the ES 350's stock carpeted floor mats and that theaccelerator pedal had become jammed against them, causing the car to accelerate out of control.NHTSA notes brakes were nearly destroyed on the car and that the accelerator pedal was "bonded" tothe floor mat. NHTSA also points out the gas pedal on the car was solidly mounted to its stalk,whereas other vehicles use hinged pedals. October 30, 2009: Toyota begins sending letters to owners notifying them of an unspecifiedupcoming recall to fix the unintended acceleration issue. In the letters Toyota states "no defectexists." November 2, 2009: NHTSA takes the highly unusual step of publicly rebuking Toyota, calling acompany press release re-iterating the statements made in the 30 October letter to owners"inaccurate" and "misleading," noting that the floor mat recall was an "interim" measure and that it"does not correct the underlying defect." Toyota publicly apologizes. November 4, 2009: Toyota issues another press release denying media reports a problem exists withits drive-by-wire electronic throttle system. However, to support the claim, Toyota simply cites aNHTSA report released two days earlier showing the agency has refused a petition by a Toyota ownerto open a new investigation into Toyota's drive-by-wire system. In that report NHTSA had alsorevealed it had begun an investigation into Toyota's all-weather rubber floor mats in March 2007 afterreports of unintended acceleration in 2007 Lexus ES 350s. The investigation would later include 2008models, and cover a total of 26 claimed unintended acceleration cases, including seven accidents.NHTSA claimed the investigation was closed in October 2007 after Toyota recalled the accessoryfloor mats and redesigned them.
Accounting for Toyota’s Recallspage 9Exhibit 3 (continued)Timeline of events relating to allegations of sudden acceleration in Toyota vehicles, p. 2 November 8, 2009: The Los Angeles Times claims Toyota had ignored over 1,200 complaints ofunintended acceleration over the past eight years because NHTSA had thrown out those reports thatclaimed the brakes were not capable of stopping the car under an unintended acceleration scenario. Inthe story a Toyota spokesman confirms the brakes are not capable of stopping a vehicle acceleratingat wide open throttle. November 16, 2009: Japanese media reports claim Toyota has made a deal with NHTSA over arecall. Toyota denies any agreement had been reached, but the company admits it had already setaside 5.6 billion to deal with the issue. Nov. 25, 2009: Toyota recalls approximately 4 million vehicles in the United States to address therisk that floormats can come loose and trap the accelerator pedal. The company also announces that itwill redesign its floor mats and install brake-override systems in its new cars. This functionality,standard across some automakers’ lines, cuts the throttle when the brake pedal is pressed. November 29, 2009: A new Los Angeles Times story claims a number of Toyota drivers say theirvehicles had still accelerated out of control with the floor mats removed. The Times also reportscomplaints of unintended acceleration increased after Toyota began using its drive-by-wire system in2002, starting with the ES 300. According to the Times, unintended acceleration complaints on LexusES 300s jumped from an average of 26 per year in 2001 to 132 per year in 2002, and there had been19 deaths since 2002 related to unintended acceleration in Toyotas, compared with 11 deathsconnected to all other automakers combined. The story also notes Toyota has been investigated forunintended acceleration more times than any other automaker, and that 74 of 132 complaints lodgedagainst the 2007 Lexus ES 350 were for cases of unintended acceleration. Toyota has no explanation,but says its drive-by-wire system is not to blame, again citing the November 2 NHTSA report.However, the Times notes that the agency has only investigated the drive-by-wire system twice in itsnine investigations and Toyota had issued three separate service bulletins for 2002 and 2003 Camrysconcerning unintended acceleration issues with the drive-by-wire system. The Times says NHTSAhad asked Toyota to look into an issue with the electronic throttle body on the 2006 Camry, whichToyota immediately delegated to the parts supplier. When the supplier reported there was no problem,NHTSA accepted the finding and quietly closed the report, keeping most of its 74 pages confidential. December 5, 2009: Following an op-ed piece in the Los Angeles Times, Toyota writes a letter to thepaper reiterating its stance that the floor mats were the root cause of most unintended accelerationclaims. The company defends NHTSA and its methodology. Dec. 15, 2009: NHTSA officials meet Toyota executives in Japan seeking prompt action on safetyissues. Toyota commits to improving its responsiveness. December 23, 2009: Another story in the Los Angeles Times, this time accusing Toyota of hidingdefects from customers and regulators over the past decade. The story notes the company has beenfined and rebuked by judges several times for failing to turn over evidence in lawsuits, and that manysuits brought against the company have been settled out of court for undisclosed sums of money. Italso reveals Toyota has only one machine in the U.S. capable of reading onboard data recorders andhas often refused to share the information with claimants and law enforcement. Toyota claims it hasbeen unfairly attacked by the paper, but confirms it only has a single data-reading machine and thatthe software on it is proprietary. Even though California and other states have laws specifying thedata on the recorder belongs to the vehicle's owner, Toyota says it shares information in select caseseither as a "community service" or when required to do so by a judge. Toyota says it is companypolicy not to use the software to investigate defect claims. Ten lawsuits over unintended accelerationare pending against the company.
Accounting for Toyota’s Recallspage 10Exhibit 3 (continued)Timeline of events relating to allegations of sudden acceleration in Toyota vehicles, p. 3 December 26, 2009: A Toyota Avalon crashes into a lake in Texas after accelerating out of control.All four occupants die. Floor mats are ruled out as a cause because they are found in the trunk of thecar. January 11, 2010: Toyota announced its brake override software fix will be made global by 2011. Jan. 16, 2010: Toyota informs NHTSA that accelerator pedals made by supplier CTS Corp may havea dangerous "sticking" defect. Jan. 19: At meeting in Washington including Inaba and U.S. sales chief Jim Lentz, NHTSA asksToyota to take prompt action. Hours later Toyota tells NHTSA it will issue a recall. Jan. 21: Toyota announces recall for about 2.3 million Toyota models to fix sticky pedals. Thecompany says the new recall is unrelated to the floor mat recall, but also announces 1.7 millionToyota vehicles would be affected by both recalls. Jan. 25: NHTSA informs Toyota it is legally obliged to stop selling vehicles even if it does not have aremedy. Jan. 26: Toyota announces it is immediately halting the sale of all models affected by the January 21pedal recall, including its best-selling Camry and Corolla sedans, and that it will shut down assemblylines for those models at five North American plants for one week beginning February 1. Jan. 27: U.S. Transportation Secretary Ray LaHood tells Chicago radio station WGN the governmentasked Toyota to stop selling the recalled vehicles. Toyota confirms LaHood's statement. Other mediareports claim Toyota has quietly informed its dealers and factories the problem lies with pedals madeby supplier CTS Corporation of Elkhart, Indiana. Lexus and Scion models, it turns out, use pedalsmade by Japanese supplier Denso, hence their exemption from the recall. The problem is said tooccur after 38,000 miles, though the cause is still under investigation. Jan. 27: Allegedly at the urging of NHTSA, Toyota expands its November 25 announcement byrecalling an additional 1.1 million vehicles due to the risk that a loose floormat could trap theaccelerator in an open position. Jan. 28: Toyota meets with NHTSA to review its pedal fix. NHTSA says it has no objections to the fix. Jan. 29: NHTSA opens investigation into CTS pedals. NHTSA asks CTS if it sold pedal to othercarmakers and when it discovered reports of problems. February 1, 2010 – Toyota announces accelerator-pedal fix, which involves a shim inserted into thepedal assembly to prevent the throttle from becoming stuck open. Feb. 2: Toyota reports a 16 percent drop in January U.S. sales. Monthly U.S. sales drop below100,000 for the first time in more than a decade and Toyota's U.S. market share falls to its lowestlevel since January 2006. Feb. 2: NHTSA renews investigation into Toyota's electronic throttle control system. U.S.Transportation Secretary Ray LaHood says, "While Toyota is taking responsible action now, itunfortunately took an enormous effort to get to this point." Toyota says it will fully cooperate withNHTSA probe. Feb. 3: LaHood warns recalled Toyota owners to stop driving, then withdraws his remarks, saying itwas a misstatement. Toyota says it is examining braking complaints about its 2010 model Prius hybrid. Feb. 4: NHTSA opens investigation into at least 124 consumer complaints about brakes on ToyotaPrius hybrids.
Accounting for Toyota’s Recallspage 11Exhibit 3 (continued)Timeline of events relating to allegations of sudden acceleration in Toyota vehicles, p. 4 Feb. 5: After keeping a low profile for nearly two weeks, President Akio Toyoda appears at a newsconference to apologize for safety problems. He announces plans to bring in a task force, includingoutside analysts to review quality. Toyota considers a recall for Prius braking issue. February 8, 2010 – Recalls for braking issues are extended to 2010 Prius and 2010 Lexus HS250hbecause of “inconsistent pedal feel” under braking on slick or uneven surfaces. More than 437,000vehicles are involved, bringing the total to more than 8.5 million Toyotas recalled. February 22, 2010 – A professor from a Podunk university looking to make a name for himself teamsup with ABC News to dupe the populace into believing their Toyota has a ghost in the machine, a.k.a.an electronics glitch that can cause acceleration independent of pedal involvement. The process bywhich he rigged the car to accelerate is shown later by Toyota and a team of researchers from a realcollege—Stanford—to work on vehicles from virtually any maker. February 24, 2010 – Toyota president Akio Toyoda testifies in Congress, apologizes again, and getsscolded. April 5, 2010 – NHTSA plans to seek a 16.4 million civil fine from Toyota for the automaker’sfailure to acknowledge accelerator pedal defects. This is the maximum amount possible under thegovernment agency’s authority. NHTSA says Toyota knew about sticking pedals in September 2009but didn’t acknowledge the problem for another four months.Sources: Reuters, MSNBC, Motor Trend, Car and Driver
Accounting for Toyota’s Recallspage 12Exhibit 4Example Toyota recall notice for unsecured or incompatible floormatsRecall Date:OCT 05, 2009Model Affected:2009 TOYOTA CAMRYSummary:TOYOTA IS RECALLING CERTAIN MODEL YEAR 2004-2010 PASSENGER VEHICLES.THE ACCELERATOR PEDAL CAN GET STUCK IN THE WIDE OPEN POSITION DUE TOITS BEING TRAPPED BY AN UNSECURED OR INCOMPATIBLE DRIVER'S FLOOR MAT.Consequence:A STUCK OPEN ACCELERATOR PEDAL MAY RESULT IN VERY HIGH VEHICLE SPEEDSAND MAKE IT DIFFICULT TO STOP THE VEHICLE, WHICH COULD CAUSE A CRASH,SERIOUS INJURY OR DEATH.Remedy:TOYOTA FILED AN AMENDED DEFECT REPORT ON NOVEMBER 25, 2009, STATINGTHAT DEALERS WILL MODIFY THE ACCELERATOR PEDAL AND, ON CERTAINVEHICLES, ALTER THE SHAPE OF THE FLOOR SURFACE UNDER THE PEDAL. THESECHANGES ADDRESS THE RISK OF PEDAL ENTRAPMENT DUE TO INTERFERENCEWITH THE FLOOR MAT. REDESIGNED ACCELERATOR PEDALS WILL BECOMEAVAILABLE BEGINNING IN APRIL 2010 AND DEALERS WILL REPLACE ANYMODIFIED PEDAL WITH THE NEW PEDAL IF DESIRED. ALSO, DEALERS WILLREPLACE ANY GENUINE TOYOTA OR LEXUS ALL-WEATHER FLOOR MATS WITHREDESIGNED ALL-WEATHER MATS, OR REPURCHASE THE PREVIOUS MATS FROMOWNERS WHO DO NOT WANT THE NEW ONES. ADDITIONALLY, SOFTWAREMODIFICATIONS WILL BE INSTALLED ON CAMRY, AVALON AND LEXUS ES 350, IS350 AND IS 250 MODELS THAT WILL ENSURE THAT THE BRAKE OVERRIDES THEACCELERATOR IN THE EVENT BOTH BRAKE AND ACCELERATOR PEDALS AREAPPLIED. TOYOTA WILL BEGIN MAILING LETTERS TO OWNERS IN DECEMBER 2009.OWNERS MAY CONTACT TOYOTA AT 1-800-331-4331, LEXUS AT 1-800-255-3987.Potential Units Affected:4260319Notes:TOYOTA MOTOR NORTH AMERICA, INC. 90LSource: recalls.html
Accounting for Toyota’s Recallspage 13Exhibit 4 (continued)Template of Toyota letter to owners warning about unsecured or incompatible floormatsCertain [Model Year] through [Model Year] Model Year [model]Potential Floor Mat Interference with Accelerator PedalSafety Recall Campaign (Interim Notice)[VIN]Dear Toyota Owner:This notice is being sent to you in accordance with the requirements of the National Traffic and Motor VehicleSafety Act. Toyota has decided that a defect which relates to motor vehicle safety exists in certain 200through certain 200 model year [name of model] vehicles. The defect is the potential for an unsecured orincompatible driver’s floor mat to interfere with the accelerator pedal and cause it to get stuck in the wide openposition. Toyota has determined that this defect does not exist in vehicles in which the driver side floor mat iscompatible with the vehicle and properly secured.Toyota is currently developing a campaign remedy and will notify you when it is ready. In the meantime, weare providing important information regarding the issue and steps you may take in the interimWhat is the risk?A stuck open accelerator pedal may result in very high vehicle speeds and make it difficult to stop the vehicle,which could cause a crash, serious injury or death.What will Toyota do?We will notify you again as soon as a campaign remedy is available for your vehicle.What should you do?We request that you take out any removable driver’s floor mat and NOT replace it with any other floor matuntil the campaign remedy is ready and implemented on your vehicle.In the event you choose not to take out your removable floor mat, Toyota strongly recommends that youensure that the correct floor mat is being used, that it is properly installed and secured, that it is not flippedover with the bottom-side up, and that one floor mat is
Accounting for Toyota’s Recalls* “According to the U.S. Transportation Department, over the past decade through the end of February, the number of deaths linked to sudden acceleration in Toyota vehicles has increased to 52.”1 Despite a long-term strategy of building
