Posted on Wednesday, February 17th, 2010 | In Market Commentary, Stocks to Watch
After the popular 2010 Prius hybrid by Toyota Motor (TM), it appears to be Corolla's turn to face a recall, this time due to power-steering problems. The automaker has received about 100 complaints related to the problem and is discussing the matter with National Highway Traffic Safety Administration (NHTSA) to see if a formal investigation is warranted.
Last week, Toyota expanded its global recall to 437,000 units (223,000 units in Japan, 156,000 in the U.S., 53,000 in Japan and 5,000 in other nations) of its popular 2010 Prius hybrid and other hybrids such as the Lexus HS250h sedan, sold in the U.S. and Japan, and the Sai, sold only in Japan. The recall addressed a problem related to braking system.
The recall of hybrids comes on top of a global recall of 8.1 million vehicles related to faulty accelerator gas pedals and slipping floor mats. About 4.45 million vehicles (2.21 million units in the U.S., 270,000 in Canada, 1.71 million in Europe, 75,552 in China and 180,000 in other nations) have been recalled for faulty gas pedals and 5.75 million vehicles (5.35 million units in the U.S. and 400,000 in Canada) for slipping floor mats. Of this, about 2.1 million vehicles have both pedal and floor mat related problems.
Akio Toyoda, the President of Toyota, has revealed that the company would include a brake-override system in all its future models worldwide, which would stop supplying power to the engine when the accelerator and brake pedals are applied at the same time. This would add a measure of safety against the sticking-gas pedal problems.
The latest string of recalls has no doubt hurt the reputation of a major automaker like Toyota. The company has been facing dozens of lawsuits due to the recall. The value of claims under the lawsuits is estimated to reach about $4 billion, reflecting an average loss of $600 per vehicle.
In January, Toyota lost more volume than any other auto group in the industry, driven by the recall. Sales fell 16% to 98,796 vehicles, which comprised all the recalled models such as Camry, Corolla and Avalon cars and the Matrix hatchback, the Tundra pickup, RAV4 crossover and SUVs including Sequoia and Highlander.
It was the first time since February 1998 that Toyota's monthly U.S. sales fell below 100,000 vehicles. Car sales decreased 10% to 60,634 units while light truck sales slashed 24% to 38,162 units.
Kelley Blue Book -- the largest automotive vehicle valuation company in the U.S. -- which considered Toyota as the best brand as per the resale value two months ago, has stated that resale value are now worth $200 to $500 less per recalled models (a decline of 1%–3%).
The auto research website Edmunds.com estimated resale or trade-in values to fall up to 10% in the short term. Edmunds' estimate for the trade-in value of a 2009 Toyota Camry has fallen by 4%–6% to $13,967 while the 2009 Toyota Corolla has declined 6% to $11,233.
The automaker plans to suspend production at plants in Kentucky and Texas for 14 working days, following the week-long closure of six North American assembly plants, in order to control the bloating inventories on the ba
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