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Toyota Makes another Global Recall

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Toyota Motor Corp. (TM - Free Report) announced another worldwide recall of 2.77 million vehicles after its major recall of 7.43 million vehicles last month. The latest recall involves 14 models including the Prius hybrid and 2000–2006 Corolla compact sedans that are subject to inspection and repair due to a problem with their steering and water-pump systems.

The Toyota-City, Japan based automaker will recall 1.52 million vehicles in Japan and 1.25 million vehicles overseas, including 670,000 Prius hybrids in the U.S., mainly to replace the electric water pump. In rest of the vehicles, the company would inspect or replace the defective steering intermediate extension shaft, which can cause unwanted steering.

Toyota has not received any reports of crashes or injuries related to the defective vehicles. The company has decided to notify owners of recalled vehicles next month. Repairs would take an hour for fixing the steering shaft and about 90 minutes to replace the water-pump.

The last month’s worldwide recall of 7.43 million vehicles included 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 they didn’t have grease applied properly during production.

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.

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. In the second quarter of fiscal year ended September 30, 2012, the Zacks #3 Rank (Hold) company saw more than threefold increase in profits to ¥257.92 billion ($3.28 billion) or ¥81.44 ($1.04) per share from ¥80.42 billion or ¥25.65 in the same quarter of prior fiscal year.

The increase in profits can be attributable to strong demand for Toyota vehicles as well as positive impact from the company’s cost control measures. However, profits were lower than the Zacks Consensus Estimate of $1.62 per share.

Revenues in the quarter grew 18.2% to ¥5.41 trillion ($68.75 billion) on a 14.9% rise in sales volume to 2.16 million units. Vehicle sales increased in all the regions, except Europe. Operating income more then quadrupled to ¥340.61 billion ($4.33 billion) from ¥75.39 billion in the second quarter of previous fiscal year.

However, Toyota projected lower consolidated vehicles sales of 8.75 million units for fiscal 2013 ending March 31, 2013, down 50 thousand units from the prior guidance. The automaker also lowered its consolidated revenues outlook to ¥21.30 trillion (up 14.6% from fiscal 2012) from the prior guidance of ¥22.00 trillion. The downward revision of sales outlook was based on difficulties in Chinese and European markets.

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