This article demonstrates one of the big roles the government has played in the capitalist markets. The government many times over the past century has stepped in when businesses have endangered the lives of their customers. This may mean pollution or unsafe products. Customers want to know that the products they use are safe, so the government creates regulation to deal with imperfect information and externalities.
Monday, April 5, 2010
U.S. is Seeking the Maximum Fine Against Toyota
The Transportation Department announced Monday that it is fining Toyota $16.4 million for failing to recall vehicles in the United States. Toyota began to recall vehicles in the U.S. starting in January, even though it knew of the problem back in September. They began to recall vehicles in Europe and Canada for a sticking accelerator problem at this time. Under U.S. law, car companies are required to make the government aware of vehicle problems as soon as they realize they exist. This has been the case since the signing of the Tread Act. Toyota now has two weeks to contest or accept the fine. Other fines may also be on their way as the government is currently investigating if other recalls were done in a timely manner.
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3 comments:
I definitely agree with the government's reaction and treatment of Toyota, especially because of all the unnecessary dangers caused by faulty craftsmanship. This case should be used as an example of how little margin of error should be allowed, particularly with something that could be as unsafe as cars. I think if it were a smaller company, they may even face expulsion from the American market. I am interested to see how Toyota will bounce back from this setback and regain their loss customers.
Regardless of the massive fine on Toyota, American consumers are still buying from the automaker. This is reflected in their stock price. When the Congressional hearings with Akio Toyoda occurred and the company began to get into trouble, the stock remained steady through these events. When the fine was issued, the stock went down somewhat. Toyota is practically begging people to buy their cars with great deals. I feel that the government was justified in the fine and has sent a message to the rest of the worlds automakers.
It is definitely interesting to note that despite the problems Toyota has been having with its cars in the past months seem to have affected its business very little. You see in commercials how much Toyota does not want to lose any business, but with a $16.4 million fine pending due to the severity of the situation, Toyota is likely to take a substantial hit. Unfortunately for Toyota, this couldn't come at a better time for other companies in the auto industry because they can capitalize on Toyota's mistakes.
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