Toyota Subsidiary Agrees To $1.6B Settlement Over Emission Data Fraud

Hino Motors, a subsidiary of Toyota Motor Corp TM, has reached a settlement with the U.S. Justice Department and other federal agencies regarding emissions testing fraud.

The company has agreed to pay over $1.6 billion to resolve allegations of fraudulent engine emissions testing and illegal engine imports.

The agreement addresses violations that allowed the company to improperly import over 110,000 diesel engines into the U.S. between 2010 and 2022.

The settlement includes both criminal and civil resolutions, with Hino Motors pleading guilty to criminal conspiracy charges.

The arrangement, which is still subject to approval by the U.S. District Court for the Eastern District of Michigan, also involves Hino's agreement to pay penalties and implement a series of corrective measures.

According to the Justice Department, the company falsified engine certification data to bypass regulatory requirements, resulting in harmful air pollution.

The agencies involved include Environmental Protection Agency (EPA), FBI, Customs and Border Protection (CBP), Department of Transportation's Office of Inspector General (DOT-OIG), National Highway Traffic Safety Administration (NHTSA), and State of California.

The settlement includes a $521.76 million criminal fine, along with a $525 million civil penalty for Hino. In addition, the company must contribute $155 million to a mitigation program aimed at addressing the excess emissions resulting from the violations.

This initiative will replace older, less efficient marine and locomotive engines across 49 states, reducing nitrogen oxide (NOx) emissions by over 41,000 tons.

These efforts are expected to have the same impact as removing 110,000 heavy-duty trucks from U.S. highways.

Hino's actions between 2010 and 2019, including manipulating emissions data, caused significant environmental harm.

Additionally, a recall program will ensure that non-compliant engines from 2017-2019 meet regulatory standards.

Price Action: TM shares are trading lower by 1.42% at $182.22 in premarket at last check Thursday.

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