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Toyota (TM) & Other Manufacturers Agree to Takata Settlement

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Toyota Motor Corp Ltd (TM - Free Report) and three other automakers have agreed to a $553 million settlement covering roughly 16 million recalled vehicles affected by the Takata recall regarding faulty airbags. Toyota has agreed to pay the largest share worth $278.5 million, with BMW AG, Mazda Motor Corporation (MZDAY - Free Report) and Subaru Corp paying $131 million, $76 million and $68 million, respectively.

The automakers claimed that they have agreed to the settlement due to the size of the recall but did not admit any fault. The settlements will be supervised by a court-appointed administrator, if approved by a Florida-based judge. Of the total settlement, automakers will utilize roughly $50 million to provide rental cars. Owners getting a recall can be reimbursed for lost wages, transportation and child-care expenses.

Lawsuits against Honda Motor Company (HMC - Free Report) , Ford Motor Company (F - Free Report) and Nissan Motor have not been settled yet, per the lawyers.

Takata inflators, which may explode with extreme force and release metal shrapnel inside vehicles, are blamed for at least 16 deaths and over 180 injuries worldwide. Roughly 100 million inflators have been recalled worldwide by 19 major automakers, the largest automotive recall ever for a single safety issue.

Earlier this year, Takata agreed to plead guilty to criminal wrongdoing and to pay $1 billion to resolve a federal investigation into its inflators. As part of the settlement, the company agreed to establish two independently administered restitution funds — one worth $850 million to compensate automakers for recalls and the other worth $125 million for individuals injured by its airbags who have not already reached a settlement.

Automakers have recalled 46 million Takata air bag inflators in 29 million U.S. vehicles as of Dec 2016. By 2019, automakers expect to recall 64–69 million U.S. inflators in 42 million vehicles. Most inflators have not been fixed.

Price Performance

Toyota has outperformed the Zacks categorized Automotive–Foreign industry in the last three months. The automaker’s shares have dropped 6% over this period, while the industry witnessed a 6.6% decline.

Zacks Rank

Currently, Toyota carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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