Toyota Recalling 7.4 Million Vehicles Over Fire Hazard

Wednesday, 10 Oct 2012 04:12 PM

 

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Toyota Motor Corp said it would recall more than 7.4 million vehicles worldwide for faulty power window switches that are a potential fire hazard, the latest in a series of setbacks that have dented the reputation of Japan's biggest automaker.

The voluntary move is the biggest single recall since Ford pulled 8 million vehicles off the road in 1996 to replace defective ignition switches that could have caused engine fires.

Toyota has battled its way back from multiple difficulties since 2008, including a series of recalls involving more than 10 million of its vehicles in 2009-11, and crippled supply chains from last year's earthquake and tsunami in Japan and floods in Thailand. It posted its biggest quarterly operating profit in four years in April-June.

The firm regained its crown as the world's best-selling automaker in the first half year and expects to sell 9.76 million cars and light trucks globally this year, including the Daihatsu and Hino brands.

More recently, though, Toyota - and other Japanese brands - have seen sales plummet in China, the world's biggest autos market, as a result of protests in a simmering Sino-Japanese territorial dispute. Toyota said on Tuesday that its China sales fell 48.9 percent year-on-year in September. Sales in China account for about 12 percent of its total.

 

 

 

QUICK FIX

The recall, intended to fix a malfunctioning power window switch on the driver's side, primarily affects cars in the United States, China and Europe.

Toyota's main rivals in the United States include Ford and General Motors Co, while in China they include Volkswagen AG, Hyundai Motor Co and Nissan Motor Co Ltd, and in Europe, Hyundai and Nissan.

The recall will include some Yaris and Corolla models, with repairs taking about 40 minutes, the company said.

"The process to repair (the power window switch) is not an extensive one," spokeswoman Monika Saito said, adding that it would involve putting heat-resistant grease on the switches, or exchanging them.

Toyota declined to say how much the recall would cost, or what impact it may have on future earnings.

Koichi Sugimoto, senior analyst at BNP Paribas Securities in Tokyo, estimated the recall could cost at least 10 billion yen ($128 million).

"Of course, 7 million vehicles is a huge number, but it's probably not going to be like last time when customers in the United States avoided buying Toyota cars. This sounds like a completely different scale from then," he said.

 

IMPACT TO REPUTATION

U.S. auto analysts and dealers were split on the impact the massive recall will have on Toyota's reputation, from a mild speed bump that will be quickly overcome to a damaging sideswipe that will send some customers to other brands.

Despite the massive size of the recall, the defect itself is "pretty minor," said Carl Swope, chairman of Toyota's National Dealer Advisory Council, adding the company has been proactive in addressing safety concerns since 2008, including recalls for sticky accelerators and accelerators that could be pinned down by loose floormats.

"I don't think that the dealers are concerned at all about the impact," Swope said. "This kind of recall is almost a testament to Toyota and their resolve to absolutely address any issue."

But others disagreed. "Toyota's had so many hard hits and so many issues in the past few years," said Jim Ziegler, a Georgia-based consultant to auto dealers.

While recalls from 2009 to 2011 were "beyond their control" this current problem was "foreseeable engineering," Ziegler said.

Ziegler said that both Toyota and Honda Motor Co have well-earned reputations for quality among U.S. consumers, but that both Japanese automakers have taken content out of their vehicles in order to keep prices down amid fierce competition, particularly from Hyundai and its stablemate, Kia Motors Co.

George Cook, professor of business at the University of Rochester in New York who worked for Ford and Xerox Corp in marketing, said the spate of recent recalls at Toyota "will hurt their reputation and image eventually.

"People are going to say, 'Are they as safe a bet now as they used to be?' said Cook.

John O'Dell, senior editor at Edmunds.com, said that consumer consideration of Toyota vehicles may take a slight hit but is not likely to suffer long-term damage due to the latest recall.

"It took a long time for the big Japanese companies to develop their ironclad reputations" for making quality vehicles, said O'Dell, referring to Honda as well as Toyota.

O'Dell said he expected Toyota's loyal U.S. customers to stick with the automaker, in part because this particular recall does not seem imminently dangerous.

 

GLOBAL SCALE

The recall will include 2.47 million vehicles in the United States, 1.4 million in China and 1.39 million in Europe, the company said.

No accidents, injuries or deaths have been reported as a result of the problem, though there is a possibility the malfunctioning switches could emit smoke, Saito said. Toyota's U.S. news release said the problem could lead to fire if commercially available lubricants were used on the switch.

Toyota will take in for repair about 459,300 vehicles in Japan, including the Vitz model, produced between 2006 and 2008.

The firm is also recalling 650,000 vehicles in Australia and Asia, 490,000 in the Near and Middle East, 240,000 in Canada and 330,000 elsewhere, said Shino Yamada, another spokeswoman for Toyota.

The vehicles recalled outside Japan include some models of the Yaris, Vios, Corolla, Matrix, Auris, Camry, RAV4, Highlander, Tundra, Sequoia, xB and xD produced between 2005 and 2010.

The first time the problem was reported was in September 2008 in the United States, Saito said.

Shares in Toyota ended down 1.9 percent on Wednesday, in line with the broader Nikkei index.

 

© 2014 Thomson/Reuters. All rights reserved.

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