Back to top

Toyota Announces Major Global Recall

Read MoreHide Full Article

Toyota Motor Corp. (TM - Free Report) made headlines again by announcing its massive recall of 7.43 million vehicles worldwide that include more than a dozen models manufactured between 2005 and 2010. The automaker needs to fix faulty power window switches in the vehicles that can cause fire because the manufacturer didn’t have grease applied properly during production.

Although it seems to be an embarrassment for the company – which has brought the issue of vehicle safety recall into the limelight after its global recall of 3.8 million vehicles in September 2009, triggered by a high-speed crash that killed 4 members of a family, Toyota has a different take on the issue.

The company considers the move to be much quicker (however the problem was first detected long time back in September 2008 in the U.S.) and transparent as it had learned from its mistakes in the past.

The recall includes vehicles sold in the U.S., Japan, Europe and elsewhere. In North America, the company will recall a total of 2.47 million vehicles covering Yaris, Corolla, Matrix, Camry, RAV4, Highlander, Tundra, Sequoia and Scion xB and xD models.

In Japan, the figure is 459,300 vehicles, including Vitz, Belta, Ractis, Ist, Auris and Corolla Lumion models. In Europe, the figure is 1.39 million vehicles, covering Yaris, Corolla, Auris, Camry and Rav-4 models. Apart from these regions, the company will recall 650,000 vehicles in Australia and Asia, 490,000 vehicles in the Middle East, 240,000 vehicles in Canada and 330,000 vehicles elsewhere.

The past string of recalls has tarnished Toyota’s reputation, resulting in declining sales and lower vehicle resale value. Since November 2009, the automaker has recalled more than 15 million vehicles globally in more than 20 recalls, surpassing all other automakers. The company lost its No.1 position to General Motors Company (GM - Free Report) and Ford Motor Co. (F - Free Report) in terms of sales volumes in the U.S.

However, Toyota has recovered well from the twin disaster in Japan and severe flooding in Thailand last year, apart from the backlash of a series of safety recalls in the past. The company saw an astounding 41.5% jump in sales to 171,910 vehicles in September this year due to commendable sales of Corolla (42.6%) and Camry (37.8%) sedans, Prius cars (103.0%) and Tacoma pickup trucks (48.9%).

In the first quarter of its fiscal year ending March 31, 2013, the Zacks #3 Rank (Hold) company posted a significant ¥91.31 increase in earnings to ¥91.68 per share ($1.14) due to strong demand for its vehicles and positive impact of cost reduction measures.

However, the company’s profits failed to meet the Zacks Consensus Estimate of $1.93 per share during the quarter. Total profit surged ¥289.19 billion to ¥290.35 billion ($3.62 billion) from ¥1.16 billion a year ago.

Consolidated revenues soared 60% to ¥5.50 trillion ($68.66 billion) in the quarter. Unit sales increased 86% to 2.27 million vehicles during the quarter led by higher sales in all the regions including Japan (97%), North America (140%), Europe (20%) and Asia (61%), and Other reporting regions (83%).

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Ford Motor Company (F) - free report >>

Toyota Motor Corp Ltd Ord (TM) - free report >>

General Motors Company (GM) - free report >>

More from Zacks Analyst Blog

You May Like