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Toyota (TM) to Settle U.S. Truck Lawsuit for $3.4 Billion

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Toyota Motor Corporation (TM - Free Report) has agreed to settle a U.S. truck lawsuit by paying roughly $3.4 billion. The lawsuit filed by U.S. pickup truck and SUV owners claimed that the vehicles did not have enough rust protection. The plaintiffs’ lawyers have said that the frames could corrode, which per court papers, could lead to serious damage, thereby risking the structural integrity of the vehicles.

Per court filings, the settlement covers about 1.5 million vehicles. The settlement has been valued at frame replacements of $15,000 per vehicle, or about $3.375 billion, and inspections at $60 per vehicle, or $90 million. This settlement is applicable to Tacoma trucks manufactured over the period 2005−2010, Sequoias between 2005 and 2008, and Tundras from 2007−2008. Toyota will be inspecting vehicles for 12 years from the day they were sold or leased to decide whether frames need to be replaced at the company’s expense, and owners who have previously replaced frames need to be reimbursed.

Toyota has denied any wrongdoing or liability in the case. The automaker stated that it would like to solve the litigation to ensure a better experience for customers and uphold the quality as well as reliability of its vehicles. The company has agreed to pay attorney’s fees of $9.75 million as well as $0.15 million in costs and expenses. Additionally, it will pay each of the named class eight representatives and the costs related to advertising for the settlement of the lawsuit.

Recently, Toyota recalled about 340,000 Pirus cars globally which is also expected to increase expenses. Moreover, the company has been facing currency headwinds due to a strong yen against the U.S. dollar in the last few quarters.

Zacks Rank

Toyota currently carries a Zacks Rank #4 (Sell).

Some better-ranked automobile stocks include Allison Transmission Holdings, Inc. (ALSN - Free Report) , Fox Factory Holding Corp (FOXF - Free Report) and Valeo SA (VLEEY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy).

Fox Factory Holding has a long-term growth rate of 15.83%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has a long-term expected growth rate of 11%.

Valeo SA has a long-term growth rate of 9.88%.

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