Shareholders Sue Toyota Over Stock Slide Related to Recalls

Toyota Shareholders Sue Over Unintended Acceleration Recall Stock Slide
Toyota Shareholders Sue Over Unintended Acceleration Recall Stock Slide

Toyota Motor (TM) may be gaining ground in repairing the 8 million vehicles it recalled for unintended acceleration problems, but it still faces a legal battle in the form of a class-action lawsuit by U.S. shareholders for failing to disclose what it knew about the defects.

Stockholders, led by the Maryland State Retirement and Pension System, filed a consolidated complaint Monday in federal court in Los Angeles alleging the world's largest automaker concealed problems related to its cars accelerating out of control, Bloomberg News reported.

Citing Toyota's own internal documents, the group of investors said the car company knew about the defects as early as 2000 and "stonewalled" regulators to avoid recalls.

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"As government regulators and the media began to focus on this serious safety problem in the Toyota vehicles, defendants initially denied that any unintended acceleration problem existed, despite a plethora of internal evidence to the contrary, and instead blamed driver error and media-induced publicity," the investors said, according to Bloomberg.

The group alleges Toyota shares have lost $30 billion in market value because of recalls related to unintended acceleration.

The Maryland pension fund seeks to represent investors who bought Toyota shares in the form of American depository receipts from May 10, 2005 until Feb. 2, 2010, shortly after Toyota announced the recalls. It is also seeking to represent shareholders who bought common stock during the same period through claims under Japanese law.

Toyota responded to the complaint via email, telling Bloomberg that the shareholders' assertions were unfounded.

The automaker's recall of vehicles related to unintended acceleration has involved two separate campaigns: one to shave gas pedals to prevent them from getting hung up on rubber floor mats; and a second to repair sticky gas pedals.

The latter recall was the subject of a record $16.4 million fine by U.S. regulators for Toyota's failure to disclose quickly enough what it knew about the defect.

In premarket trading Tuesday on Wall Street, Toyota shares were down fractionally to $71.85 each. The stock is down about 14% for the year.