Toyota Braces for big sales hit from recall

Toyota braces for big sales hit from recall
Analysts estimate cost to come to between $900 million and $2.2 billion news services
updated 8:17 a.m. CT, Tues., Feb. 2, 2010

NAGOYA/DETROIT – Toyota Motor’s unprecedented recall of millions of vehicles with accelerator problems is taking a toll on sales and may force the world’s largest automaker to cut its 2010 forecasts.

Auto sales figures for January, due later on Tuesday, are expected to show a sharp drop for Toyota after it pulled eight of its most popular models from showrooms last week following complaints over sticking accelerator pedals.

“The sales forecast is something that we’re extremely worried about,” Executive Vice President Shinichi Sasaki told a news conference in the first public comment from an executive at Toyota’s head office. The company will report its third-quarter earnings on Thursday.

On top of a separate recall for slipping floormats, also linked to unintended acceleration, some 8.1 million Toyota vehicles are now being recalled, more than its total group sales last year.

Sasaki said it was too soon to put a number on the ultimate cost of the recall. But Tatsuo Yoshida, an auto analyst at UBS in Tokyo, estimated the recalls are likely to cost about $900 million, and lost sales are already costing Toyota another $155 million a week.

Two other analysts estimated the costs for the recall and the shutdown to around roughly $1.1 billion to $2.2 billion.

“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.

Although Toyota says the occurrence of problems is rare, public confidence is being shaken by coverage of the saga, including the harrowing details of the crash of a Lexus, blamed on unexpected acceleration, which killed an off-duty California state-trooper and three members of his family last year.

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 company’s U.S. head, Jim Lentz, appeared on TV on Monday and also expressed his regret as part of a public relations blitz in Toyota’s largest market.

Meanwhile, Europe’s No.2 carmaker PSA Peugeot Citroen said it would discuss with Toyota in coming days how to proceed with its own recall of just under 97,000 Citroen C1s and Peugeot 107s, built on the same assembly lines as Toyota’s Aygo at a joint plant in the Czech Republic.

The spokesman confirmed PSA cars used the same pedal as Toyota and said two cases that could potentially be linked to a sticking accelerator pedal had been reported around the end of 2009 and the start of 2010, but the link was not confirmed.

“We haven’t had any accidents reported in our network,” the spokesman stressed.

The spokesman said he could not say how much the recall campaign would cost, nor how long it would take.

“Decisions about recall campaigns are made jointly, so during this meeting with Toyota we’ll decide on the details of the campaign, the type of repair that will be carried out and when the campaign can be launched,” he told Reuters.

Toyota detailed its plans on Monday to fix the faulty pedals on at least 4.2 million vehicles in North America and Europe with a small metal spacer to prevent sticking.

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

Sasaki said costs were not taken into account with the recall and said they would monitor sales before reviewing their 2010 forecast. Last month Toyota forecast global auto sales would rise 6 percent this year, but has since said that did not take the impact of the recalls into account.

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.

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.

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

The AP and Reuters contributed to this report.

© 2010

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