Toyota Shareholders Sue Over Falling Stock Price

Toyota (TM) is already facing product liability suits over defects in its recalled cars. The settlement to people who claim injury could hit $5 billion according to several industry experts.

But, liability suits are not the only fight the Japanese car company will face. Shareholders have begun to sue the firm over the drop in Toyota’s stock price. The firm had lost $30 billion of its market cap at one point last month.

The cases against Toyota are fairly simple. Stockholders say that Toyota management lied to investigators about the cause of brake failures and accelerator problems. That kept the share price up for a time and some investors acquired the stock assuming that Toyota’s trouble was minor. When the truth began to come out about the issues, Toyota’s shares fell.

The case will be difficult to prove unless regulators find a smoking gun. Toyota has argued that the problems with brakes and accelerators  surprised almost everyone in the company, especially senior management. Toyota says it addressed the safety issues as quickly as it could.

If the US government brings no charges against the world’s. No.1 car company and “buys” the idea that Toyota management did the best it could with mechanical problems with its cars under the circumstance, the shareholder suits go nowhere. A single accusation by regulators which accuses the company of a cover-up changes that completely.

Douglas A. McIntyre