by Emily Jane Fox
NEW YORK (CNNMoney) — Toyota Motors agreed to pay $1.1 billion to install new safety features and reimburse owners of up to 16 million cars to settle a class-action suit filed by drivers who had problems with unintended acceleration in its cars in 2009-2010.
This is one of the largest lawsuits of its kind, according to Steve Berman, one of the lead plaintiff lawyers.
The company said that the settlement will lead to a one-time, $1.1 billion pre-tax charge against fourth quarter earnings to cover the costs.
Under the agreement, Toyota will install a brake-override system in cars where floor mats got stuck, leading them to accelerate unintentionally. The company will also set up a fund of $250 million to be paid to former Toyota owners who sold their cars between Sept. 1, 2009, and Dec. 31, 2010, to compensate the owners for the reduced value of the cars from the negative publicity.
A separate fund of $250 million will be established to compensate current owners whose vehicles are not eligible for a brake-override system.
All 16 million current owners will be eligible for a customer care plan, that will provide a warranty on certain parts tied to unintended acceleration for between three and 10 years.
Until these issues, Toyota held the top reputation for vehicle quality and safety. But it has been dogged by significant recall problems over the last three years. It has already announced recalls of more than 10 million vehicles worldwide for various problems so far this year.
Earlier this month, the car company agreed to pay a record $17.4 million to the National Highway Traffic Safetey Administration for problems related to a 2012 recall in one of its Lexus models. That’s the largest fine allowed by law for a single investigation.
And in November, it recalled 7.43 million cars due to a power window problem that poses a fire risk.
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