Toyota urged to act over recalls

Japan's trade minister says carmaker must act quickly to restore consumer confidence.

    Analysts say the latest recalls and sales suspensions could derail Toyota's recovery [AFP]

    To date the company has recalled 7.65 million vehicles over problems with potentially faulty accelerator pedals, and there is no indication that the problem has yet reached its peak.

    Shares tumble

    The recalls centre on fears that a fault in the design of the pedals could cause them to stick and cause acceleration without warning.

    In video


    Al Jazeera's Zeina Awad reports on the impact of Toyota's safety recalls in the US

    The recall, as well as subsequent sales freezes affecting some of Toyota's most-popular models, has badly dented the company's reputation as well as its share price.

    In Tokyo on Friday, Toyota's shares continued to slide having already tumbled more than 15 per cent in the past week as the recall spread.

    On Thursday the chairman of the House Energy and Commerce Committee in the US congress said he would hold a hearing next month to investigate Toyota's response to the safety alert.

    "Like many consumers, I am concerned by the seriousness and scope of Toyota's recent recall announcements," Henry Waxman said in a statement.

    The congressional hearing, scheduled for February 25, will review complaints of sudden unintended acceleration in Toyota vehicles

    Costs

    According to Reuters, industry analysts have estimated Toyota will have to shoulder at least $250m in warranty costs alone for the smaller of the two recalls already underway in the US.

    Toyota's freeze on sales of some its most popular models will hurt earnings [Reuters]

    In addition earnings are expected to take a further hit from lost production, financial support to dealers and sales incentives the company has said it is considering in a bid to keep customers being wooed by rivals.

    A its monthly sales outlook, US auto research website Edmunds.com said Toyota's share of the US car sales was likely to drop to 14.7 per cent in January to it lowest level since March 2006.

    At the same time, rival Ford was likely to see its share rise to 18 per cent, Edmunds said.

    Moreover, analysts say Toyota is likely to face lawsuits from people who claim injuries from the defects or class-action claims on behalf of consumers who believe the crisis has damaged the value of their cars.

    Reputation hit

    On Thursday Fitch Ratings warned that the impact of the recalls and sales freezes could endanger Toyota's recovery from the losses it saw at the height of the global financial crisis.

    Toyota only returned to the black for the July-September quarter with net income of $241m after three straight losing quarters.

    "The recalls and sales and production suspension cast a negative light on Toyota's reputation for quality, just as the company emerges from an unprecedented downturn in the auto industry," Fitch said in a statement.

    The warning came as Toyota officials said the company was near a solution to the problem with parts supplier CTS Corporation, which makes the affected pedals, producing a redesigned assembly.

    CTS also makes pedals for Honda, Mitsubishi, Nissan and Ford vehicles in China, but the company said pedals made for those manufacturers do not have the same design.

    SOURCE: Agencies


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