Wednesday, January 27, 2010

Toyota Crashes and Burns As It Suspends Production; Sales of Eight Top Models

Toyota was already reeling from the recall of more than 2 million cars for problems with a stuck accelerator. The company then announced yesterday that it would suspend sales and production of eight affected models because of ongoing problems with the accelerators.
Toyota is also halting production at six North American car-assembly plants, beginning the week of Feb. 1, and gave no date on when production could restart.

The problem could spread to Europe, where a similar accelerator part is being used, said Toyota spokeswoman Ririko Takeuchi, while declining to give the number of vehicles affected. The company was studying possible responses, including a recall, she said.

The problem part comes from one U.S. supplier and does not affect models that use parts from different suppliers, Takeuchi said. Toyota's Japan plants are not affected.

"For Europe, the number and models potentially concerned are under evaluation,'' said Philippe Boursereau, spokesman for Toyota France.

The automaker said the U.S. sales suspension includes the following models: the 2009-2010 RAV4, the 2009-2010 Corolla, the 2007-2010 Camry, the 2009-2010 Matrix, the 2005-2010 Avalon, the 2010 Highlander, the 2007-2010 Tundra and the 2008-2010 Sequoia.

Toyota has said it was unaware of any accidents or injuries due to the pedal problems associated with the recall, but could not rule them out for sure.

"This action is necessary until a remedy is finalized,'' said Bob Carter, Toyota's group vice president and general manager.

The automaker's shares fell 4.3 percent in Tokyo trading Wednesday.
This is an opportunity for other automakers to step into the breach and poach sales that would have otherwise gone to Toyota. Toyota had long cultivated an image of high quality, but it has been taking a significant beating because of the sudden acceleration issues.

It's going to significantly hit the dealers who now are without most of the product lines that they depend on. 

Companies in a position to benefit include Honda, Ford, and GM. GM has been trying to burnish its own image as producing high quality cars, and this may help in that respect. Honda and Ford would also benefit since they produce high quality cars and Ford has already shown that it can weather the economic downturn without resorting to government ownership as was the case with GM.

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