Toyota Motor Corporation
) trouble with product recalls does not seem to end. The Japanese
automaker has now announced its second largest recall of 6.36
million vehicles globally.
27 Toyota models have been recalled for 5 different issues and
some of the cars have been recalled for multiple issues. If we
double-count such vehicles, the total number of recall increases
to 6.76 million.
The largest of the five recalls is being made to replace a
spiral cable, which can be damaged due to turning of the steering
wheel, resulting in deactivation of air bags. Toyota recalled
about 3.5 million vehicles to fix this problem, of which 2.34
million were sold in North America and 810,000 in Europe.
Another 2.32 million cars are being recalled due to a faulty
seat rail spring. 760,000 are recalled owing to problems in the
steering column, while another 160,000 are being recalled to fix
a problem in the windshield wiper motors. The fifth recall is for
20,000 vehicles whose metal fragments might amass in the engine
starter's circuitry, leading to a fire.
These recalls will lead to significant expenses for Toyota. As
no accidents were reported due to these problems, the recalls
display the automaker's cautious approach toward product defects
after suffering multiple times for late recalls.
In 2012, the U.S. Department of Transportation slapped the
maximum allowable fine of $17.35 million on Toyota due to delayed
response regarding a defect in its vehicles as well as late
recall of those vehicles. This fine was in addition to the $48.4
million fine imposed on the automaker by the U.S. government in
2010 due to late recall of millions of defective vehicles.
Toyota also made one of the largest settlements in the history
of automotive industry by paying $1.6 billion in a class-action
lawsuit related to complaints of unintended acceleration in its
vehicles. Moreover, in Mar 2014, Toyota agreed to a $1.2 billion
settlement for criminal charges related to problems in
accelerator pedals and floor mats of its cars, which led to
sudden acceleration and even crashes. This was 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.
) is also facing a string of investigations and lawsuits over
late recall of cars with defective ignition switches. A
congressional committee probe on the matter is currently going on
and the automaker is being fined $7,000 per day for failure to
fully answer the questions posed by the NHTSA.
Currently, Toyota carries a Zacks Rank #2 (Buy). Some other
automobile stocks worth considering are
Tata Motors Ltd
), both of which sport a Zacks Rank #1 (Strong Buy).
DAIMLER AG (DDAIF): Get Free Report
GENERAL MOTORS (GM): Free Stock Analysis
TOYOTA MOTOR CP (TM): Free Stock Analysis
TATA MOTORS-ADR (TTM): Free Stock Analysis
To read this article on Zacks.com click here.