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Toyota hit with second multimillion-car recall in just over a month

A Toyota Motor Corp. Prius vehicle and other vehicles are displayed at the company's showroom in Tokyo Nov. 14, 2012. Toyota said it will recall around 2.77 million vehicles worldwide, including certain models of the Prius, due to problems with the steering mechanism and the hybrid system water pump, its second multimillion car recall in two months.


Toyota Motor Corp. said it will recall 2.77 million vehicles worldwide, including some of its popular Prius hybrid cars, for steering and water pump problems in the car maker's second multimillion-vehicle recall in a little over a month.

The defects, which Toyota said had caused no accidents and could each be fixed in an hour or so, could cost hundreds of millions of dollars to repair, according Deutsche Securities autos analyst Kurt Sanger.

While the recall is widespread, the flaws are less serious and any damage to Toyota's reputation would likely be limited compared with massive recalls in 2009 to 2011 when unintended acceleration problems in Toyota vehicles were the suspected cause of fatal crashes in the United States.

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Toyota this year recaptured the crown of the world's top auto maker after last year's natural disasters, which temporarily disrupted production in Japan and Thailand, had knocked it from the top spot in 2011.

Toyota is recalling 2.76 million vehicles worldwide to fix a steering component that could be damaged by wear and tear, and 630,000 gasoline-electric hybrid vehicles to replace water pumps, company spokesman Joichi Tachikawa said. Many vehicles are targeted by both recalls, resulting in overlap.

Deutsche Securities analyst Sanger said the extent of the recall suggested a more aggressive stance by the company to address defects after its recall crisis a few years ago.

"They seem to continue to be obsessively monitoring these things and looking for potential problems before they arise," Sanger said.

Toyota gave no indication of the likely cost of the latest recall, but Sanger estimated that, including parts and labour, it could amount to ¥30-billion to ¥40-billion ($380-$500-million U.S.).

"That's a decent range of financial impact, we assume. There doesn't seem to be much brand risk around this, given that there haven't been injuries and excessive complaining leading up to the product action and recall."

Toyota has faced a long battle to restore its image since problems with unintended acceleration in its vehicles led to a series of recalls of more than 10 million vehicles worldwide from 2009 to 2011, damaging its reputation for quality.

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Discussion of the company's quality issues re-emerged with last month's recall of more than 7.4 million vehicles to fix power window switches, the industry's biggest single recall since Ford Motor Co took 8 million vehicles off the road in 1996.

Two weeks later, Tokai Rika, a supplier of auto parts to Toyota, booked an extraordinary loss of ¥15-billion to pay for problematic parts connected with a recall.

Shares in Toyota ended down 0.8 per cent at ¥3,060 on Wednesday, underperforming the Nikkei benchmark index, which ended flat.

More than half of the vehicles in the latest recall, or 1.5 million, are in Japan, making this Toyota's biggest single recall in its home market. It is also recalling 670,000 vehicles in the United States and 496,000 in Europe.

The recall covers certain Corolla compact models made from 2000 to 2006 and second-generation Prius cars made between 2004 and 2011. Toyota has sold about 3.3 million Prius hybrid vehicles globally since the car went on sale in December 1997.

Analysts have cited Toyota's recovery from its 2009 recall fiasco and last year's natural disasters as signs of resilience.

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It has also been hit by a plunge in car sales in China since September, when anti-Japanese protests erupted during a territorial spat between Tokyo and Beijing, but nevertheless raised its full-year net profit forecast this month to $9.7-billion as overall sales remained solid.

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