Toyota Motor Corporation
) has announced the recall of 119,000 Avalon sedans of model
years 2003 and 2004. Apparently, noise from other electrical
components in the car sometimes damages the circuits of the air
bag control module. This leads to accidental deployment of
airbags. The problem also leads to inadvertent tightening of the
seat belt pretensioners at times.
Toyota is not aware of any accidents due to the problem,
although it has reports of an injury due to it. The automaker has
notified the owners of the recalled cars. Toyota dealers will
attach an electrical noise filter to the air bag control module
to fix the problem.
The company has been facing trouble with defects and recalls.
Recently, the company agreed to a $1.2 billion settlement with
the U.S. Attorney's Office for the Southern District of New York
in relation to the criminal charges for problems in accelerator
pedals and floor mats of its cars, which led to sudden
acceleration and even crashes. This is the highest penalty
imposed on any automaker and is 35 times higher than the maximum
penalty the National Highway Traffic Safety Administration
(NHTSA) can impose.
Toyota also admitted to misleading customers about the
problem. The investigation regarding the matter was started in
Feb 2010 although the automaker has been aware of the problem
since 2007. Toyota initially failed to recall cars with defective
parts and continued to manufacture new cars using them despite
being aware of the safety risk associated with them. The company
finally issued a recall of 8 models after a crash killed an
entire family but left out 3 other models that had the same
The carmaker had earlier paid $1.6 billion to settle a class
action lawsuit related to sudden acceleration of cars. The
company also incurred $1.1 billion during the recall of the
affected vehicle. Moreover, it lost vehicle sales worth $880
Currently, Toyota carries a Zacks Rank #2 (Buy). Some other
automobile stocks worth considering are
Tata Motors Limited
Tesla Motors, Inc.
). Tata Motors and Daimler sport a Zacks Rank #1 (Strong Buy),
while Tesla holds a Zacks Rank #2.
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