The recall fiasco continues to whip
Toyota Motor Corp.
). Recently, the automaker revealed that it would recall nearly
1.3 million cars globally for two separate defects. The first
defect involves 752,000 units of Toyota Corolla and Corolla
Matrix small cars from the 2003 and 2004 model years while the
second one includes 385,000 Lexus IS luxury sedans and its series
from the 2006 through 2012 model years.
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The Corolla recall is related to defective airbags due to a
malfunctioned IC chip in the airbag control unit. The malfunction
can cause the control unit to receive electrical interference
from other parts in the car, causing the airbags to deploy when
it is not required.
The airbag control unit in the vehicles has been manufactured by
TRW Automotive Holding Corp.
). However, the IC chips have been supplied to TRW by a third
party, according to some TRW official.
According to a Toyota official, the faulty airbag system resulted
in 18 injuries in the U.S. and most probably 2 crashes outside
Japan. Toyota decided to add an electrical signal filter to the
airbag control module in the defective vehicles. Repairs are
expected to take more than an hour.
The Lexus recall is related to defective windshield wipers that
may become inoperative. The wiper arm nut of the front wiper in
the defective vehicles may not be sufficiently tight. As a
result, the wiper may unable to work properly under certain
weather conditions such as snow.
Toyota decided to exchange the nut in repairs that will take
about half an hour. According to Toyota, there have been no
reports of injuries or accidents related to the vehicles with
Since November 2009, the automaker has recalled about 20 million
vehicles globally, surpassing all other automakers. A few months
back, Toyota had announced a major worldwide recall of 7.43
million vehicles that included more than a dozen models
manufactured between 2005 and 2010. The recall was related to
faulty power window switches in the vehicles that can cause fire
because they did not have grease applied properly during
U.S. Government Fine
Last year, the Transportation Department of U.S. slapped a fine
of $17.35 million on Toyota due to late response regarding a
defect in its vehicles to safety regulators as well as late
recall of those vehicles.
According to the department, it was the maximum allowable fine
under the law for not initiating a recall in a timely manner. The
latest fine adds to $48.4 million imposed by the U.S. government
on the company in 2010 due to late recall of millions of
Sales Crown Regained
Despite these, Toyota recaptured the sales crown from
General Motors Company
) by selling 9.75 million vehicles globally in 2012, which
exceeded GM's sales of 9.29 million vehicles. Germany's
) came third with sales of 9.07 million vehicles for the year.
Toyota's victory can be attributed to its impressive product
lineups and marketing initiatives.
The automaker lost its No.1 position to GM in 2011 after gaining
the title from GM in 2008. The loss of crown was driven by
declining reputation due to a series of safety recalls as well as
negative impact from natural disasters in Japan and Thailand in
2011. However, Toyota had vowed to regain the top position by
increase its dependence on the non-U.S. markets, especially the
high growth emerging markets.
Recent Earnings Result
Toyota posted a 22.2% rise in earnings per share (EPS) to ¥31.55
(39 cents) in the third quarter of fiscal 2013 ended on Dec 31,
2012 from ¥25.81 in the same quarter of prior fiscal year. The
EPS was lower than the Zacks Consensus Estimate of $1.23.
Net income rose 23.4% to ¥99.91 billion ($1.23 billion) from
¥80.94 billion a year ago. The increase was attributable to lower
provision for income taxes during the quarter.
Revenues increased 9.3% to ¥5.32 trillion ($65.56 billion) on a
7.3% rise in unit sales to 2.11 million vehicles. Among all the
geographic markets, unit sales rose at the fastest pace in Asia
(53.4%) and declined at the fastest pace in Japan (15.0%).
Operating income dipped 16.7% to ¥124.76 billion ($1.54 billion)
from ¥149.68 billion in the third quarter of previous fiscal
year. The decline was attributable to a 10.1% rise in costs and
expenses during the quarter.
For fiscal 2013 ending Mar 31, 2013, Toyota raised its
consolidated vehicles sales guidance to 8.85 million units from
8.75 million units. Consequently, the automaker projected higher
consolidated revenues of ¥21.80 trillion (reflecting an expected
increase of 17.3%) compared with fiscal 2012. The upward revision
of sales outlook was based on higher overseas vehicle sales,
primarily in North America.