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Business

After record fine, Toyota recalls Lexus and Prado SUVs

Latest update : 2010-04-20

Japanese automaker Toyota has extended its global safety recall to include the Lexus GX 460 and other models. On Monday, Toyota was levied a $16.4 million fine by the US. Toyota is facing at least 97 wrongful death lawsuits.

AFP - Toyota on Tuesday widened its latest global safety recall, a day after paying a record US fine that analysts say leaves the Japanese giant more vulnerable as it battles a slew of lawsuits.
   
The world's biggest carmaker has been embroiled in its worst crisis yet, issuing about 10 million recall notices globally in the past seven months, mostly for defects with accelerator and brake systems.
   
In the latest blow, it widened a recall of two sports utility vehicles -- the Lexus GX 460 and some models of the Land Cruiser Prado -- to 34,000 units worldwide to reduce the risk of rollover accidents.
   
On Monday the company agreed to pay a 16.4-million-dollar fine, the largest for an automaker in the United States, for hiding for at least four months accelerator pedal defects blamed in more than 50 US deaths.
   
Toyota said it agreed to pay the fine in part "to avoid a protracted dispute and possible litigation", but it denied wrongdoing, saying: "We did not try to hide a defect to avoid dealing with a safety problem."
   
But analysts said paying the fine weakens Toyota's position as it faces a host of civil and criminal lawsuits in the United States.
   
Toyota is facing at least 97 US lawsuits seeking damages for injury or death linked to sudden acceleration and 138 class action lawsuits from American customers suing to recoup losses in the resale value of Toyota vehicles.
   
Tatsuya Mizuno, auto analyst at Mizuno Credit Advisory, said: "The amount of the fine is very small, but it is a symbolic event. It will mean more damage to the image of Toyota among consumers.
   
"The class actions are a serious threat for Toyota. In the past, some very strong companies have gone down because of a class action."
   
Mamoru Kato, auto analyst at the Tokai Tokyo Research Center, said the carmaker had little choice but to pay the fine in the United States, where its executives have been grilled by lawmakers.
   
"There were concerns that paying the fine would mean Toyota admitted wrongdoing, but there were also concerns that a refusal to pay would spark an outcry, including accusations that Toyota doesn't feel sorry," Kato said.
   
"If the sum had been enormous, there may have been a strategy of not paying it, but it was affordable," he told AFP. "(Toyota) decided to pay it while stressing that this was not a complete admission of guilt."
   
Toyota overtook General Motors in 2008 as the world's top automaker. But the safety issues have raised questions about whether it sacrificed its legendary quality to become number one.
   
The latest setback came last week when the US magazine Consumer Reports gave the Lexus GX 460 a rare "Don't Buy: Safety Risk" rating, warning it could roll over during high-speed turns.
   
Toyota has suspended global sales and production of the SUV and promised to fix the vehicle stability control (VSC) system that is meant to prevent loss of wheel traction during turns.
   
Toyota said that when a driver takes a curve at high speeds, "the vehicle could slide sideways, due to the insufficient activation of the VSC".
   
It blamed the problem on the fact that "heavy components, such as the fuel tank, are located on the left side, and in left-hand drive versions the left side is made even heavier because of the presence of the driver."
   
Toyota said it would recall 13,000 units of the GX 460 and 21,000 left-hand drive models of the Land Cruiser Prado in the United States, Europe, Russia and some Middle Eastern countries.
   
Analyst Mizuno said the latest recall was damaging because "the Lexus are very important models for Toyota".
   
"The output volume is not very large compared to other models like the Corolla or Camry. But it is a strong brand, representing Toyota's technologies in the luxury vehicles."
 

Date created : 2010-04-20

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