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Toyota Recalls Scion iQs for Airbags

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Toyota Motor Corp. (TM - Free Report) plans to recall 11,000 units of Scion iQ mini cars due to a defect that is preventing their airbags from deploying properly. The recall will affect 2012–2013 model year iQs, manufactured between July 31, 2011 and October 12, 2012.

According to National Highway Transportation Safety Administration (NHTSA), the front passenger air bags in the vehicles are having difficulty to deploy when needed, or deploy in a wrong way, causing potential injury. The problem originates from a certain cable that could be damaged when the car’s passenger seat is moved forward or backward.

Toyota will start notifying the vehicle owners and recall the vehicles in December. Dealers will install a protective cover on the cable to prevent it from being damaged.

  A few days back, Toyota announced a worldwide recall of 2.77 million vehicles after its major recall of 7.43 million vehicles last month. The recall involved 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.

  Last month’s worldwide recall of 7.43 million vehicles included more than a dozen models manufactured between 2005 and 2010. The automaker needed to fix faulty power window switches in the vehicles that can cause a fire because they didn’t have grease applied properly during production.

The recall included vehicles sold in the U.S., Japan, Europe and elsewhere. In North America, the company has announced plans to 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 attributed to strong demand for Toyota vehicles as well as a 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 revenue 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 the Chinese and European markets.

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