Toyota Braces for big sales hit from recall

Posted on Feb 2, 2010 | 0 comments

Toyota braces for big sales hit from recall
Analysts estimate cost to come to between $900 million and $2.2 billion
msnbc.com 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 msnbc.com

Toyota’s Big Recall

Posted on Jan 29, 2010 | 0 comments

WASHINGTON – For a century, the basic idea behind pressing the accelerator on a car has been pretty straightforward. What’s going wrong with some Toyotas isn’t simple.

Experts say the sudden acceleration problem that has put the brakes on Toyota sales and production is likely not a single problem but an alignment of complicated interconnected conditions.

Nothing illustrates that more than the contradictory statements from the two companies involved. Toyota Motor Corp. is telling the government that it thinks a friction problem in its accelerator pedal mechanisms may make the pedal “harder to depress, slower to return, or, in the worst case, mechanically stuck in a partially depressed position.”

CTS Corp., the Elkhart, Ind., supplier that makes the devices for Toyota, said in a statement Wednesday that the friction problem accounts for fewer than a dozen cases of stuck accelerators, “and in no instance did the accelerator actually become stuck in a partially depressed condition.”

If there were a simple answer, a one-thing gone wrong glitch with a fix, it’s unlikely Toyota would be in the mess it’s now in.

When Toyota recalled 4.2 million vehicles last fall, it said it was because floor mats were interfering with the pedals. That may have been an issue, but now the company is saying it’s latest recall of 2.3 million vehicles is linked to worn pedal mechanisms that increase friction in certain conditions and cause the accelerator to stick sometimes.

On Thursday, Toyota announced it was extending the recalls to China and Europe and recalling an additional 1.09 million vehicle in the U.S.

Outside safety experts say possible causes also include the complicated electronic sensors that relay the message from the gas pedal to the engine, the design and location of the sensor system, a lack of a fail-safe override mechanism, and even a certain media-fed awareness that puts more people on the lookout for the problem.

Academic researchers say the rarity of sudden acceleration problems is a telling sign to the difficulty of determining what’s going wrong.

“This is very unusual and happens on a very rare circumstance, and a whole bunch of things have to happen simultaneously,” said Raj Rajkumar, head of Carnegie Mellon University’s automotive research lab. It’s like lots of unlikely lottery hits happening at the same time, but with millions of Toyotas, they do happen.

Sean Kane, president of Safety Research and Strategies Inc., a Massachusetts-based car safety investigation and advocacy group, said he’s certain there is no single cause. He said he’s logged thousands of stuck gas pedal complaints.

“We are convinced that this a multifaceted problem,” Kane said. “You’ve got a multitude of problems that are coming to the surface that result in one thing: unintended acceleration.”

How an accelerator pedal is supposed to operate is anything but complicated. Stepping on the pedal starts a chain of events to open the throttle, sending more gas and air into the engine. The car goes faster. Stop pressing on the gas, the engine’s speed decreases and the car slows down.

At first, the pedal was directly linked to the throttle, or hydraulics did the job. Then more than a decade ago, electronics started handling the relay. It’s part of an overall switch to computer controls seen throughout the transportation industry.

Most throttle systems on modern vehicles are electronic. Typically, the driver steps on the accelerator and gets resistance back from a spring. The movement activates components in the pedal assembly that send an electronic signal to the engine-control computer, and a signal from the computer feeds more fuel to the engine.

In documents provided to the government, Toyota indicated the mechanical problem that causes the pedal to stick occurs when water condenses inside the system when the heater is on. The company also thought a material used to make the pedal system was a problem, so it switched to a different material, but the problem persisted.

Toyota spokesman Mike Michels said Wednesday that the company wouldn’t discuss the mechanics of the pedal and the possible causes of the problem “because the engineering investigation is ongoing.”

Craig Hoff, a professor of mechanical engineering at Kettering University in Flint, Mich., said the pedal assemblies typically contain a Teflon bearing that would not be affected by temperature, so it’s unlikely the problem is connected to weather conditions. He has not specifically studied the Toyota case but said the problem could be linked to the mechanical spring that pushes back when someone hits the accelerator.

“If I was going to sit here and guess, I’d start thinking about something is binding — either there’s friction that’s too high somewhere or another issue is that spring is not strong enough to push back,” said Hoff, who has worked on accelerator systems.

The problem could also be connected to the electronics relay system — something Toyota highlighted in a video more than a dozen years ago touting its “electronic throttle control system with intelligence.”

A few years ago, the company sent out a technical bulletin saying some cars accelerate on their own between 38 and 42 mph, and it reprogrammed the electronics with new software codes, Kane said.

John Heywood, director of the Sloan Automotive Lab at MIT, said because Toyota is the only automaker having this problem, it could be something specific to its design, such as the location and integration of the electronics relay sensor.

“These are very complex systems,” Rajkumar said. “One ought to expect that there will be glitches like these.”

CTS, which relies on Toyota for 3 percent of its annual sales, supplies similar parts for Honda Motor Co., Nissan Motor Co. and Mitsubishi Motors Corp.

But auto suppliers typically design parts based on the specifications of the individual automaker, and a part’s installation and operation can vary based on the vehicle. The three other automakers said they had received no complaints about their accelerator pedals.

A key problem appears to be the absence of a mechanism that overrides the accelerator if the gas and brake pedals are pressed at the same time, Kane said. In the recall last year involving floor mats, Toyota told the government it would retrofit some vehicles with that feature.

Such a mechanism, called a “brake-to-idle algorithm,” is an important fail-safe, Kane said. He said some other automakers already have them, and Rajkumar said more will install them in the future.

In the late 1980s, the government investigated complaints that Audi 5000 vehicles would suddenly accelerate when the vehicle shifted from park to drive or reverse. The National Highway Traffic Safety Administration found that most of the incidents were caused by drivers putting their feet on the wrong pedals.

But the safety agency found that vehicle recalls were necessary for the safety of the Audi 5000, whose sales plummeted after a major 1986 recall. Audi modified the accelerator and brake pedals, installed systems that prevent shifting from park unless the brake is pressed, and corrected idle speed control systems to address the problem.

Heywood, who isn’t familiar with the specifics of Toyota’s situation but has studied sudden acceleration problems in other cars and was part of a panel looking into the Audi problem, said media attention caused more people to be aware of the Audi problem, and then more people reported it.

GM: No free wheels for Woods anymore

Posted on Jan 18, 2010 | 0 comments

The Associated Press
updated 10:24 a.m. CT, Wed., Jan. 13, 2010

NEW YORK – General Motors Co. says an agreement with Tiger Woods that allowed the fallen golf star to have free access to its vehicles is over.

Woods’ endorsement contract with GM’s Buick brand ended in 2008, but an arrangement remained in place that allowed him to keep several GM loaner vehicles. A spokesman says the arrangement ended on Dec. 31.

Woods has lost a host of endorsement contracts since the Nov. 27 car crash outside his Florida home. The accident triggered allegations marital infidelity that led him to take a break from professional golf, though the GM spokesman says the vehicle arrangement had been previously scheduled to end on Dec. 31.

USA Today reported GM’s decision in a blog post Tuesday.

GM Says Saab Decision Due Later This Month or Feb.

Posted on Jan 12, 2010 | 0 comments

The final decision on whether Swedish automaker Saab will live or die is likely to come later this month or in February, General Motors Co.’s top European executive said Tuesday.

But GM Europe President Nick Reilly said the longer the troubled brand lingers without being sold, the less likely a sale will be.

In another indication of Saab’s bleak outlook, GM also said Tuesday that two executives have been named to oversee the brand’s wind-down. The executives, Stephen Taylor and Peter Torngren, replace Saab’s CEO and board of directors and will be in charge of liquidating the brand, GM said.

GM started closing Saab operations last week but still is in talks with two possible suitors, despite Tuesday’s appointments.

CEO Ed Whitacre Jr. said last week that he was not optimistic Saab could be saved.

Reilly also told reporters at the Detroit auto show Tuesday that he expects to finish restructuring GM’s Opel operations this month. He says changes that combine GM Europe and Opel management will be announced Friday or Monday.

GM is trying to gain concessions from unions and loans from European countries as it restructures Opel.

GM has been trying to sell Saab for more than a year, but has entertained other bids after a deal with Swedish specialty car maker Koenigsegg collapsed last month.

Dutch automaker Spyker made a bid last week, as did Luxembourg private equity group Genii Capital and also emerged as a new suitor, saying it had teamed up with British billionaire and Formula 1 tycoon Bernard Ecclestone.

But GM announced last week that it had hired a company to start winding down Saab’s operations. The automaker employs about 3,400 people.

Reilly said while the negotiations continue, Saab continues to lose money.

“The longer it carries on as we start to wind it down, the more difficult it is for somebody to come along and buy it,” Reilly said.

Spyker Cars Renews Bid to Buy Saab From GM

Posted on Dec 22, 2009 | 0 comments

STOCKHOLM

In a final attempt to rescue Saab Automobile AB, Dutch auto maker Spyker Cars on Sunday submitted a new offer to buy the Swedish brand from General Motors Co.

Spyker Cars Renews Bid to Buy Saab

Spyker said it has submitted a new 11-point proposal to GM, addressing the issues that made talks collapse earlier this week.

GM on Friday said it would wind down Saab because issues arose during the sales talks with Spyker that could not be resolved, and the window of time to complete a deal was small.

Spyker Chief Executive Officer Victor R. Muller said he hoped the new offer would make GM change its mind.

“We are very confident that our renewed offer will remove the impasse that was standing in the way of an agreement on Friday, and this would still allow us to conclude the deal prior to the expiry of the deadline originally set by GM of Dec. 31,” he said in a statement.

“We have made every effort to resolve the issues that were preventing the conclusion of this matter and we have asked GM and all other involved parties to seriously consider this offer,” he added.

Muller said the new offer removes a demand that a loan from the European Investment Bank to Saab be approved before the end of the year, and has the full backing of Saab’s management.

It said the new offer expires on Monday, giving GM little time to make a decision.

Saab employs about 3,400 people worldwide, most of them at its main plant in Trollhattan, Sweden.

Gert-Inge Andersson, leader of the local government in Trollhattan, daid he did not yet dare to believe in the new offer.

“It’s bordering on torture, of citizens and the employees at Saab, when messages like these fly back and forth,” he told local news agency TT

Swedish government officials declined to comment.

GM bought a 50 percent stake and management control of Saab for $600 million in 1989 and gained full ownership in 2000 for $125 million more.

In February, the Swedish brand went into creditor protection in an effort by GM to sell the unit. A consortium led by Swedish sports car maker Koenigsegg Automotive AB signed a preliminary deal to buy the brand in June but dropped out in November.

Chrysler Won’t Re-pay 3.7 Billion

Posted on Dec 17, 2009 | 0 comments

Chrysler won’t repay $3.7 billion TARP loan
Plan filed with bankruptcy court has no provision to return money
Reuters
updated 2:39 p.m. CT, Tues., Dec . 15, 2009

NEW YORK – The U.S. Treasury will not recover any portion of the $3.7 billion still outstanding in loans it made to automaker Chrysler under the Troubled Asset Relief Program, according to the terms of a plan filed with bankruptcy court on Tuesday.

The U.S. government has filed proofs of claim for unpaid principal, interest, fees and expenses, but “will receive no recovery on account of such claim,” according to court documents filed on behalf of Old Carco LLC, the units of Chrysler that remain under bankruptcy protection while they are liquidated.

The proposal was laid out in a disclosure statement filed with the New York bankruptcy court in Manhattan.

A disclosure statement is a comprehensive document sent to creditors before they vote on a plan of reorganization. The Old Carco plan also proposed repaying Class 1 priority claims in full.

The case is In re Old Carco LLC, US Bankruptcy Court, Southern District of New York, No. 09-50002.