Tags: Toyota | Sales | Costs | Hurt

Recall Expected to Hurt Toyota Sales, But Costs Unknown

Tuesday, 02 Feb 2010 11:37 AM

 

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Toyota Motor's head of quality said he did not know how much it would cost to recall and fix millions of vehicles with faulty accelerators, but acknowledged sales were suffering.

In the first public comment from an executive at Toyota's head office, Executive Vice President Shinichi Sasaki said costs were not taken into account with the recall of nearly 4.5 million vehicles equipped with faulty accelerators in North America and Europe.

"The sales forecast is something that we're extremely worried about," he told a news conference in the central Japanese city of Nagoya on Tuesday.

"Already, I am hearing that sales have been affected somewhat in January," he added, noting the company will report its third-quarter earnings on Thursday.

On Monday, the world's largest automaker detailed its plans to fix the faulty pedals with a small metal shim, or spacer, to prevent them from sticking and causing unintended acceleration.

On top of a separate recall for slipping floormats also linked to unintended acceleration, almost 8 million vehicles worldwide are being recalled.

Toyota, fighting to preserve its reputation for quality, said it would restart production of eight models including its popular Camry, Corolla and Rav4 models on Feb. 8 after an unprecedented one-week shutdown at six plants in the United States and Canada.

Sasaki, who appeared alone in front of more than 100 reporters, said he there had been a bigger-than-usual sales impact from the recall.

Toyota said last month it expected global auto sales to rise 6 percent this year but has said the forecast did not take the recall impact into account.

Sasaki said they would monitor sales before reviewing their 2010 sales forecast.

Toyota President Akio Toyoda, the grandson of the company's founder, has not formally addressed the public or media on the recall problems. While in Davos, Switzerland last weekend, he appeared briefly on broadcaster NHK and apologized to consumers.

The costs for the recall and the shutdown now look to come to roughly 100 billion yen to 200 billion yen ($1.1 billion to $2.2 billion), two analysts estimated.

"It's a positive that we now can grasp what the direct costs might be, but Toyota has yet to address uncertainties about indirect costs, such as litigation costs and costs of incentives to win back customers," said JP Morgan analyst Kohei Takahashi.

"The size of these indirect costs is of far greater importance" for Toyota's future, he said.

Shares in Toyota rallied almost 5 percent in Tokyo on Tuesday following the company's U.S. announcement on the fix and restart for production.

The jump in its shares comes after about an 18 percent tumble over the last seven business days. A weaker yen also boosted shares, some investors said.

Toyota faces a growing number of lawsuits claiming it and its U.S. supplier CTS Corp endangered drivers by not acting sooner to fix problems with faulty accelerator pedals.

Rivals such as General Motors, Ford Motor and Hyundai Motor have been offering discounts targeting Toyota customers.

The moves by Toyota marked the most detail the automaker has provided on its plans to address a safety issue that threatens its finances and reputation, and will have dented its U.S. sales for January.

Lawsuits announced on Monday in the U.S. claimed Toyota had ignored signs of trouble with some of its top-selling models. The suits are part of what is expected to be a wave of litigation against the automaker for claims ranging from losses on car resale values to injury and death.

Analysts and dealers said it would take months for the automaker to fix all of the vehicles at risk of having an accelerator pedal stick in the open position.

© 2014 Thomson/Reuters. All rights reserved.

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