The Department of Transportation wants to make Toyota (TM) pay the maximum civil penalty– $16.375 million– for “failing to notify the auto safety agency of the dangerous ‘sticky pedal’ defect for at least four months, despite knowing of the potential risk to consumers.” The penalty being sought against Toyota would be the largest civil penalty ever assessed against an auto manufacturer by NHTSA.

The fine might as well be $1. The $16 million is nothing more than a slap on the wrist for a company of Toyota’s size and means very little compared with the damage done to the brand by its recalls of over 8.8 million cars worldwide and the potential liability lawsuits it faces from customers. Some estimates put the value of liability litigation costs at above $5 billion.

“We now have proof that Toyota failed to live up to its legal obligations,” said U.S. Transportation Secretary Ray LaHood. “Worse yet, they knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families. For those reasons, we are seeking the maximum penalty possible under current laws.”

But what should US taxpayers and consumers think when the world’s largest car company faces such a modest penalty? There could be two answers to that. The first is that the Transportation Department never expected to face a consumer safety issue as large as the one that the Toyota recalls presents. That means that Department’s fee structure is based on a sliding scale that would make a $16 million plus penalty commensurate with the most severe violations that the government expected.

The other is that the Federal Government expects the court system and the costs of the recalls to be the real financial risks that Toyota faces.  It is these criminal charges, civil charges, litigation costs, and repair costs that amount to a much more severe punishment in comparison to what the Transportation Department could ever mete out. If this is the case, it speaks poorly of the system under which the government handles egregious violations of federal code.

The penalty is one in a long line of problems Toyota faces, but it is, in the scheme of things, hardly worth mentioning.

Douglas A. McIntyre

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