Toyota Recalls 1.7 Million Vehicles as Quality Woes Mount

By Chris Gallagher | January 26, 2011

Toyota Motor Corp said it would recall more than 1.7 million vehicles worldwide, bringing its total for recalls to nearly 16 million since late 2009 and dealing a blow to its efforts to restore its reputation for quality.

Although the situation is different from last year, when Toyota attracted intense scrutiny from U.S. safety regulators over unintended acceleration problems that were blamed for dozens of fatalities, the latest recall may make it harder for Toyota to convince investors it has put its quality problems behind it.

Shares of Toyota, the world’s top automaker, extended early declines and closed down nearly 2 percent on the Tokyo Stock Exchange after the announcement.

“Toyota faces harsh competition from Honda, which is in a much better situation in the U.S. market — this is reflected in its stock price which now stands at multi-year highs,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. “That’s why investors are a little nervous and sold Toyota when this negative news came out,” he said.

Toyota was the only major automaker to see its sales fall in the United States last year, and just squeaked by General Motors Co to keep its spot at the top of the global sales ranking.

The biggest recall among those announced Wednesday was to fix a faulty fuel pump and connecting pipe in 1.34 million vehicles, including the Noah minivan and other models sold in Japan as well as 141,000 Avensis units sold overseas. That is Toyota’s biggest recall in six years and its second-biggest ever for a single defect, said Toyota spokeswoman Shiori Hashimoto.

Toyota said in a filing to Japan’s transport ministry that no accidents had been reported because of the defects.

Toyota said it was also recalling around 335,000 Lexus units sold overseas, including about 245,000 sold in the United States, due to trouble with a fuel pressure sensor connected to an engine fuel delivery pipe.

In two other filings on Wednesday, Toyota said it would recall about 75,000 Crown models and about 6,200 Townace vans in Japan to fix the same fault found in Lexus cars sold in the U.S. and elsewhere.

Toyota’s Hashimoto declined to say how much the latest recalls would cost the Japanese carmaker.

For the financial year to March, Toyota expects operating profit of 380 billion yen ($4.6 billion), lower than both Honda and Japan’s No.3, Nissan Motor Co. are forecasting.

Toyota’s last big recall was in October when it said it would fix 1.66 million Avalons, Highlanders and other models worldwide mainly for a defect in the master cylinder brake seal.

Toyota shares closed down 1.9 percent at 3,400 yen, underperforming a 0.6 percent fall in the benchmark Nikkei average.

Shares of Honda, Japan’s second-largest automaker, gained 0.7 percent to 3,470 yen.

($1=82.22 YEN)

(Additional reporting Noriyuki Hirata, Tim Kelly and Antoni Slodkowski; Editing by Lincoln Feast)

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