Toyota Recalls Prius and Lexus - Analyst Blog

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Toyota Motor Corp. ( TM ) plans to recall 242,000 units of its Prius and Lexus hybrid cars globally due to a defect that is reducing the effectiveness of the brakes. All the vehicles were manufactured between Mar and Oct 2009.

The Japanese automaker decided to recall the vehicles after receiving 90 complaints from the drivers who said that they are having difficulty in pressing the brake pedal. However, the company has not yet received any reports of accidents or injuries related to the problem.

Toyota revealed that due to a defect, nitrogen gas can leak into the brake fluid, causing ineffectiveness of the brakes. As a result, the company would inspect the brake booster pump assembly on Prius and Lexus HS 250h vehicles and provide replacement if necessary.

Nearly 117,000 vehicles will be recalled in Japan. Meanwhile, 91,000 units will be recalled in North America, 30,000 in Europe and the rest in other markets.

Automotive safety recalls were brought into focus by media after Toyota's announcement of the largest-ever global recall of 3.8 million vehicles in September 2009, triggered by a high-speed crash that killed 4 members of a family. Later on, a string of recalls has led Toyota to face numerous personal injury and wrongful death lawsuits in federal courts.

Few months ago, 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 defective vehicles.

In April, Toyota along with other Japanese automakers, Honda Motor Co. ( HMC ), Nissan Motor Co. ( NSANY ) and Mazda Motor Corp. have decided to recall 3.4 million vehicles globally for an identical problem. All these automakers plan to recall vehicles for fixing defective airbag system in their vehicles, supplied by Japanese auto parts maker Takata Corp.

Toyota recalled 1.73 million vehicles globally. Among them, 580,000 vehicles were recalled in North America, 490,000 vehicles in Europe and 320,000 vehicles in Japan. Honda announced recall of 1.14 million vehicles worldwide while Nissan recalled about 480,000 vehicles and Mazda about 45,500 vehicles globally.

Currently, shares of Toyota retain a Zacks Rank #1 (Strong Buy). Other stock that worth to consider in the same industry includes Peugeot S.A. ( PEUGY ) with Zacks Rank #2 (Buy).



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HMC , NSANY , PEUGY , TM

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