Toyota tallies recall bill

February 4, 2010
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, TOKYO, Feb 4 – Toyota Motor said Thursday it was staring at a two-billion-dollar hit from a global safety recall that has now spread to Britain and battered the credibility of the world\’s biggest carmaker.

Accelerator problems with its vehicles have tarnished Toyota\’s vaunted reliability record, raising questions about whether it sacrificed quality in its successful drive to overtake General Motors as the world\’s number one.

The gas pedal problems have been blamed for several accidents, including an August crash in California in which four family members were killed when their Lexus sped up on a highway and crashed in a ball of flames.

The occupants\’ terrifying last moments were captured in a 911 message in which the panic-stricken male caller tells the operator "we\’re approaching the intersection … hold on and pray!" Then the car crashes.

Despite the staggering recall of eight million vehicles, the Japanese giant said it was on course to earn 80 billion yen (880 million dollars) this fiscal year after posting a net profit of 153.2 billion yen in October-December.

But recall costs and lost sales are expected to slash profits by up to about 180 billion yen (2.0 billion dollars) in the current financial year to March, the company said as it came in for ferocious criticism in the United States.

Transportation Secretary Ray LaHood on Wednesday vowed that US officials will "continue to hold Toyota\’s feet to the fire to make sure that they are doing everything they have promised to make their vehicles safe".

LaHood caused a flurry when he said that owners of Toyotas affected by the accelerator defect should "stop driving" them and take them to a dealer. He later called the remark "obviously a misstatement".

Members of the US Congress have scheduled hearings into Toyota\’s recall crisis, and want proof that the problems with the accelerator pedal are mechanical and not a more complex one related to electronics or software.

Apple co-founder Steve Wozniak said this week he believed Toyota\’s troubles with the defective accelerator might be linked to "some bad software" after his Prius sped up while in cruise-control.

Now new concerns are being raised about the brakes on the Prius, Toyota\’s flagship hybrid car which is in the vanguard of the company\’s push to produce a new generation of greener vehicles.

US authorities have reported more than 100 complaints of brake problems on the Prius, while Toyota said it had received 77 complaints in Japan.

At a hastily scheduled news conference after its earnings announcement, Toyota said it would soon unveil safety measures relating to the Prius brakes.

"We\’ll make an announcement before long," said Hiroyuki Yokoyama, a Toyota managing officer in charge of quality control.

In Britain, Toyota said it was recalling tens of thousands of cars across seven model ranges owing to the faulty accelerators. It did not specify the figure, which newspapers said could come to almost 180,900.

The latest woes have hit the carmaker just as it was starting to emerge from its worst crisis in decades.

Worldwide, Toyota made a surprise return to profit in the July-September quarter as sales bounced back from the depths of the global economic downturn.

Sales in Japan have been boosted by the Prius — in part due to a US-style "cash for clunkers" programme designed to lift sales of greener cars — but now the popular hybrid\’s safety is itself under question.

"If consumers lose confidence in hybrid cars, which have complicated technology that is very different from conventional gasoline cars, that would have a grave impact on Toyota\’s sales," Tokai Tokyo Securities auto analyst Mamoru Kato said.

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