Toyota Recalls Snowball to Become: Disaster City

Toyota Recall News Reel: Disaster City
By Bertel Schmitt on January 28, 2010

Here is a round-up of the Toyota news that is flowing furiously out of all news outlets. Everybody, from the Wall Street Journal to Al Jazeera weighs in on the issue. Grab a cup of coffee. Or something stronger.

More recalls: Toyota announced late Wednesday that it must recall another 1.1 million vehicles “to address the risk that floor mats could trap accelerator pedals and cause bursts of sudden acceleration,” says Reuters. According to Reuters, “Toyota now has recalled nearly 6m vehicles for problems with the accelerators used across its lineup.” This is not counting the 2m vehicles in Europe that will be recalled.

EU recall official: Toyota Motor said today that it definitely will be expanding the recall to Europe, says AFP via Google. “Toyota will implement a recall in Europe,” said company spokesman Paul Nolasco. “We are still not sure about the models and the number of vehicles.” Initial estimates, published by The Nikkei [sub], spoke about another 2m cars in Europe. Plants will not be closed in Europe, because different parts already are being used in new production.

Recall spreads to China: China’s quality watchdog agency said “bu hao” to Toyota and ordered the recall of “at least 75,000 vehicles in China,” says London’s Times.

Could cost $1.1b a month, Toyoda’s head: Toyota’s decision to stop U.S. production and sales of eight models to fix defective accelerator pedals may cost the company as much as 100 billion yen ($1.1 billion) in operating profit per month, says Bloomberg. Traditionally, smaller problems cause Japanese CEOs to apologize, bow, and abdicate. Toyota spokesman Paul Nolasco declined to comment on whether President Toyoda might step down as a result of the recalls. Toyoda is the grandson of the carmaker’s founder.

Banished from the rental lot: Avis, Hertz, Budget, Enterprise, Alamo and National stopped renting out all Toyota vehicles that are affected by the recall, the Wall Street Journal reports.

Bad vibes: GM halted sales of about two dozen unsold Pontiac Vibes, which are essentially the same car as the Toyota Matrix. The Vibe was built at the NUMMI plant. According to USA Today, some 99,000 Vibes on the road are being recalled also.

The fix is not in: “We don’t know what the recall remedy is going to look like. We don’t know if we’re going to repair pedals or replace pedals, or some combination of both,” Toyota spokesman Brian Lyons said to USA Today. Toyota released a Q&A on the issue. Q: “When can consumers expect the remedy?” A: “We don’t have the timing yet.”

Dealers have no answers: „Toyota dealers across the country were getting calls Wednesday from concerned owners but had few answers a day after the company announced it would stop selling and building eight models because of faulty gas pedals,” says the Reno Gazette Journal. Standard answer of harried service personnel to concerned customers: “We have as much information as you guys have.”

Plants will stay closed: “There’s no reason for the plants to crank back up until we’re sure what the final recall method will be,” Brian Lyons said to USA Today. “We’re not going to start the assembly lines until we have the complete picture.” He did not forecast how soon that will be.

10 years wait on parts? “This could be a very long drawn out process for Toyota,” said Rebecca Lindland, auto analyst with IHS Global Insight, to Boston’s WBZ-TV. “”Typically suppliers make 16 thousand of these parts a week.“ If 8m cars need new parts, it would take 10 years at the going rate.

Supplier perplexed: CTS, the company that supplies the gas pedal for Toyota, says on its website that “CTS has been actively working with Toyota for awhile to develop a new pedal to meet tougher specifications from Toyota. The newly designed pedal is now tested and parts are beginning to ship to some Toyota factories.” Interesting to note in the “what did they know and when did they know it” department. In another act of finger pointing, CTS says that “the products we supply to Toyota, including the pedals covered by the recent recall, have been manufactured to Toyota’s design specifications.” When asked by the Wall Street Journal why Toyota would stop selling and producing thousands of some of its best-selling models if the problem identified affected only eight vehicles, Mitch Walorski, CTS’s director of investor relations, said CTS officials were perplexed. Forget any ideas of shorting CTS. The whole Toyota business is only 3 percent of their sales.

What did they know and when did they know it? According to the Freep, the NHTSA investigated reports of unintended acceleration in Toyota’s best-selling model, the Camry, as early as 2004. A NHTSA report said examination of 139 complaints found no defects.

Toyota knew a year ago: Toyota says it knew there were problems with accelerator-pedal assemblies from supplier CTS late last year, but not enough to warrant a recall, reports USA Today.

Toyota’s stock: 7203.T on the Tokyo Exchange opened weak at 3,530 Yen, rallied to 3,680 in the morning session, only to plummet back to 3,560 Yen in the final hours of trading, as more bad news came in. The stock had changed hands for 4,235 Yen on Jan 20, and it was downhill from there. Canada’s Financial Post recommends the Toyota stock as a “buying opportunity.”

Fitch downgrades Toyota: Rating company Fitch put Toyota on watch negative, Reuters reports. “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,” said Jeong Min Pak, Senior Director in Fitch’s Asia-Pacific Corporates team. “This could hamper the company’s potential sales and profitability recovery, especially in the U.S. market.”

Toyota causes January sales slump: “Meanwhile, Toyota’s problems threatened to pull down industry-wide auto sales for January and hit resale values for used cars,” an analyst said to Reuters (via bnet.com) “U.S. auto sales in January, due out next Tuesday, are expected to show the market has softened from the 10.8 million-unit sales pace of the fourth quarter of 2009.” A case of unintended deceleration?

Sudden acceleration self-help: The press is abuzz with advice on how to deal with runaway cars. According to the LA Times, Toyota recommends “stepping on the brake pedal with both feet, using firm and steady pressure. After hitting the brakes, shift the transmission into neutral.” Any questions? “Call the Toyota Customer Experience Center at (800) 331-4331“

Circling vultures: Toyota’s competitors will benefit from ToMoCo‘s bad fortunes, said Carlos Ghosn, CEO of Renault and Nissan, to the Nikkei [sub]. Ford and GM are already baiting Toyota owners with $1000 to switch.

Al Jazeera is on the story: Taking time off from distributing Bin Laden’s latest announcements, Al Jazeera calls the matter “a devastating blow to Toyota and Toyota’s reputation.”