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Toyota Motor Corp. Slapped With Largest Fine in Automaker History

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Staying on the taper path, the Federal Open Market Committee today said it would trim its monthly purchases of U.S. Treasuries and mortgage-backed securities from $65 billion to $55 billion. All three major U.S. stock indices were down on the committee's afternoon statement, with the Dow Jones Industrial Average  (DJINDICES: ^DJI  ) falling 44 points as of 3 p.m. EDT.

The Federal Reserve in recent months has moved away from its stance connecting the unemployment rate to its readiness to lift interest rates, and that trend continued today. While the unemployment rate has fallen faster than anticipated, it's mostly because of discouraged job hunters giving up the search. The Fed recognizes that issue and today announced that it would drop the unemployment rate as the primary measuring stick for the economy's strength. It will instead rely on a multitude of factors to decide when raising interest rates is the correct move. With that in mind, here are some large industrial companies making headlines today.

The First 787 Dreamliner to roll out at an accelerated production pace. Source: Boeing

Inside the Dow, Boeing (NYSE: BA  ) had a couple of favorable headlines hit the news feed today. Boeing and Comair announced an order for eight 737 MAX 8s, the first such order from an African operator. The order was actually booked in December 2013 but was previously unidentified on the Boeing orders and deliveries website; it is valued at $830 million at list prices. This order will support future fleet expansion for the brands operated by Comair. There's also an option for the carrier to take another eight aircraft in the future.

In other positive news for the aviation juggernaut, the Federal Aviation Administration announced today that the Boeing 787 Dreamliner is safe after a thorough review of its lithium-ion battery issues.

"We concluded that the aircraft was soundly designed, and that Boeing and the FAA had processes in place that were designed to identify and correct any issue that might arise during the manufacturing process," FAA Administrator Michael Huerta said, according to USA Today. "It's many layered. You don't have single points of failure."

This is welcome news for Boeing investors who have grown weary of the Dreamliner project running over budget due to production delays and other issues. As production of the 787 Dreamliner continues to accelerate, investors hope the project will become profitable for Boeing in 2016.

Outside the Dow, investors of General Motors are hoping that its recent recalls of millions of vehicles globally doesn't turn into a nightmare akin to Toyota's (NYSE: TM  ) unintended acceleration problems. Toyota just agreed to pay a $1.2 billion fine, which is the largest penalty imposed on any automaker, according to federal prosecutors. Ultimately, the defect led to a recall of more than 10 million vehicles and the company's admission to concealing information and making false statements regarding safety issues.

"Other car companies should not repeat Toyota's mistake," U.S. Attorney General Eric Holder warned in a statement, according to Automotive News. "A recall may damage a company's reputation, but deceiving your customers makes that damage far more lasting."

Toyota will record the $1.2 billion in after-tax charges against earnings. While this is a huge penalty it won't put a dent in the automaker's cash pile of nearly $60 billion. That said, this drawn-out process could have larger ramifications for its brand inside the automotive industry, where Toyota long ago captured the image of reliability and safety. While General Motors is beginning its own battle with ignition issues linked to at least 12 deaths, Toyota's tarnished image could open up the door for Ford to continue increasing its market share and positive brand image in the U.S. market. 

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  • Report this Comment On March 19, 2014, at 3:18 PM, SaraWang wrote:

    Yes, if the F.B.I. is correct and there was a fault with acceleration, what was it? And how was it addressed, if there was such a fault?

    Most people know Toyota is a standup company... Toyota makes the best automobiles in the world. They last forever, are incredibly safe, cheap to repair and maintain, cheaper to fill up at the gas tank than anything ($20 thanks to GasBuddy), only cost around 25/month to insure (thanks to Insurance Panda), and are simply pleasures to drive.

    Has any scientific evidence ever been presented to the public that this alleged accelerator problem was a real problem and not human error? I would expect the newspapers to reference the evidence behind such a settlement that is being reported.

    Without such evidence, this settlement has the flavor of government extorting money from a deep pocket as a political display for the public. Toyota may have concluded that the litigation and reputation costs of continuing to contest the government's claims was not worth the effort.

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Daniel Miller

As a Motley Fool Industrial Specialist, I use my marketing and business background in the automotive industry to evaluate major automakers and other large industrial corporations. Follow me on twitter for tweets about stocks, cars, sports, and anything I find amusing.

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Related Tickers

9/1/2015 4:35 PM
^DJI $16058.35 Down -469.68 -2.84%
BA $127.44 Down -3.24 -2.48%
The Boeing Company CAPS Rating: ****
TM $114.34 Down -4.04 -3.41%
Toyota Motor Corp… CAPS Rating: ***