After it was announced that Toyota Motor Corp.’s settlement proposal of $1.1 billion was smaller than expected, its shares gained 1.6% last Thursday as investors breathed a sigh of relief. The settlement was for the resolution of U.S. class-action litigation claims over unintentional acceleration in its vehicles. Toyota said that to cover the estimated costs of the settlement, it will take a one-time pretax charge of $1.1 billion, according to court filings.
Due to the complaints over unintended acceleration, Toyota issued numerous recalls between 2009 and 2011, forcing the company to pull back more than 10 million vehicles globally and hurting its image for quality. Under the settlement, there is a $250 million fund for former Toyota owners who sold vehicles at lower prices due to the negative publicity.
There will also be a different $250 million fund for owners who don’t qualify for the brake override system. According to a senior trader at a foreign brokerage, the $1.1 billion charge and the $250 million compensation eliminated the uncertainty over Toyota's share price.
Toyota shares gained 1.6% to 3,890 yen in midmorning trade. This year, the stock has increased 51.7%, moving at a faster rate than a 36.5% gain in the Topix's transport equipment subindex, home to Toyota and other automakers.
Another factor that helped Toyota shares was the previous day’s announcement that it hopes to attain record-high groupwide global sales and production in calendar year 2012. Daihatsu Motor Co and Hino Motors Ltd. are included in the groupwide figures.