Toyota Faces a Massive Recall in Emissions-Control Dispute

Toyota Motor Sales USA faces one of the largest automobile recalls ever as federal officials prepare to seek a court order in Washington on Monday to force the nation’s best-selling foreign car maker to replace or repair emissions-control computers on 2.2 million vehicles.

The Torrance-based subsidiary of Japan’s Toyota Motor Corp. says it will fight the recall. If the company were forced to replace the $250 computers, the cost could hit $550 million.

No one is arguing that the vehicles themselves are causing emissions problems. But federal and California air quality officials allege that the diagnostic computers don’t work properly on most U.S.-market Toyota and Lexus cars and trucks made between January 1995 and June 1997.

The U.S. Justice Department action follows Toyota’s rejection late Thursday of a proposed settlement agreement. It is believed to be the first time an auto maker has rejected a federal offer to settle charges involving allegedly faulty emissions systems.

Neither side would disclose terms of the settlement proposal, but it is believed that Justice Department negotiators sought payments totaling more than $100 million.

The U.S. distribution and marketing arm of Honda Motor Co. settled a similar case in May 1998, agreeing to pay $17 million in penalties. Federal and California regulators said 1.6 million Honda cars were equipped with improperly functioning emissions-control computers. Honda also agreed to run special emissions checks on the vehicles and to extend the warranty on emissions systems.

The threatened Toyota recall is part of an escalating war between the auto maker and air pollution regulators that began in 1997 when the California Air Resources Board told Toyota that its previously approved emissions-sensing system no longer met state standards.

Toyota claims that the computers met all the rules that were in place when they were certified.

The issue centers on the way the state has tested the computers’ ability to sense fuel vapor leaks and to alert the driver via a “check engine” warning light on the dashboard.

All Toyota and Lexus vehicles built during the 30-month period are covered except the Land Cruiser and its luxury Lexus RX 450 and RX 470 twins. Like other big sport-utility vehicles, they are exempt from the pollution-control rules governing other cars and trucks because they weigh more than 3 tons.

When the Toyota system was initially accepted by CARB for use on Toyota and Lexus vehicles in 1995, the approval was based on laboratory tests that used computer simulations.

But when the state got around to running actual driving tests in 1997, inspectors found that the computers failed to detect all of the intentionally caused emissions leaks and that the warning light did not always function. The on-board diagnostic computers, state investigators also reportedly have told Toyota, check for fuel vapor leaks too infrequently.

Toyota has insisted that the state changed the rules in the middle of the game and is attempting to force the auto maker to fix a problem that really doesn’t exist.

A separate hearing in Sacramento will begin Monday on CARB’s demand that Toyota recall 330,000 cars and trucks sold in California with the suspect emissions-control computers.

That hearing, sources said, is expected to take the rest of the year and could have a dramatic effect on the future of state automotive emissions controls.

If Toyota wins, some sources say, the 1995 rules establishing the state’s on-board diagnostic program, or OBD II, would have to be scrapped.

Toyota and state pollution officials reached a stalemate in negotiations on the issue last year and in September the state notified the auto maker that it would seek a statewide recall order if Toyota did failed to devise a plan to fix the diagnostic computers.

The federal Environmental Protection Agency stepped into the picture in January, issuing notice through the Justice Department that it would seek a national recall if the matter could not be resolved though negotiations.

The EPA and the Justice Department declined comment Friday.

But Toyota was not so reticent.

“It’s disheartening,” company spokesman Joe Tetherow said. “We tried to settle, but our reasonable offers were all rejected. Now we will go the distance” in fighting the federal and state recall efforts.