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Toyota Shares Drop on Sienna Recall

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Toyota Motor Corp.’s (TM - Free Report) share price dropped 1.3% to $130.26 on Sep 27, following its announcement of recalling 615,000 Sienna minivans in the U.S. The automaker is recalling the vehicles of model years 2004-2005 and 2007-2009 to fix a problem in the shift lever assembly.

Toyota has made several recalls and the drop in share price might be a reflection of shareholders’ fading confidence owing to that. Product recalls, amid the competitive scenario, can seriously dent a brand’s image.

Toyota said that a possible damage to the shift lock installed in the vehicle may lead the minivan to move out of the park position even if the brake pedal is not pressed. As a result of this, 21 accidents and 2 injuries were registered.

Earlier this month, Toyota recalled 369,000 vehicles worldwide, including about 235,000 in the U.S., roughly 74,000 in Japan and 37,500 in Europe. The automaker will recall 200,000 Highlander Hybrid models manufactured from 2006 to 2010 and Lexus RX 400h vehicles developed during 2006 to 2008 to fix a hybrid-system problem. The SUV transistors get overheated in the hybrid system, which results in sudden halt of the vehicle.

Toyota also announced the recall of another 169,000 vehicles including Lexus IS 350, IS 350C and GS 350 manufactured between 2006 and 2011. Toyota is recalling these vehicles to repair an engine bolt defect. These vehicles also face the problem of halting suddenly as bolts get loose in the variable valve timing control device.

Automotive safety recalls were brought into focus by media after Toyota’s announcement of the largest global recall of 3.8 million vehicles in Sep 2009, triggered by a high-speed crash that claimed 4 lives. Later on, Toyota had to face numerous personal injury and wrongful death lawsuits in federal courts, hampering its image.

Other than Toyota, many other players in the automobile market are witnessing a series of recalls. In Aug 2013, Dongfeng Honda Automobile Co., the Chinese arm of Honda Motor Co., Ltd. (HMC - Free Report) , announced that it is recalling all Siwei CR-V vehicles manufactured from Mar 2, 2010, to Aug 30, 2012 to fix a defective front shock absorber piston rod. Honda is recalling almost 408,000 SUVs.

Ford Motor Co. (F - Free Report) and General Motors Company (GM - Free Report) also announced that they are recalling vehicles to fix certain issues.

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