Toyota's $2b recall of key models will drag it into red

Tokyo/Washington : Toyota Motor Corporation expects costs and lost sales from its massive safety recall to total $2 billion (Dh7.34 billion) by the end of March, keeping it in the red for the year despite its strongest profit in six quarters.

Toyota's recall of more than 8 million vehicles due to problems with unintended acceleration has wiped out $30 billion in share value, hurt its reputation and overshadowed what until just two weeks ago had been expected to be an upbeat story of improving earnings.

"Toyota's recall this time is unlike any other in auto industry history," said Lee Sung-jae, an analyst at Kiwoom Securities in Seoul. "The scale is huge to begin with, and this deals a fatal blow to the very core value Toyota represented — that is the quality of its cars."

Automakers enjoyed a boost in demand in the latter part of 2009, thanks largely to government incentives designed to spur sales and improving access to credit as the global economy recovered.

Toyota was one of the biggest beneficiaries of the US cash-for-clunkers scheme, allowing it to post its best quarterly operating profit since early 2008 in the three months to Dec-ember.

But the world's largest automaker is now under investigation for its handling of the recall of a host of its most popular models including the Camry, Corolla and Rav4.

Up to 19 US crash deaths over the past decade may be linked to accelerator-related problems at Toyota, congressional officials have said.

US Transportation Secretary Ray LaHood said on Wednesday he would take the unusual step of calling Toyota President Akio Toyoda to emphasise how seriously the Obama administration is taking the investigations.

"Our ... people will hold Toyota's feet to the fire to make sure they are going to do everything they said they were going to do to make the vehicles safe," he said.

With less than two months left in the current financial year, Toyota slashed what most analysts had considered an excessively conservative operating loss forecast to 20 billion yen ($220 million) from 350 billion yen.

Work on Anti-lock system

Toyota Motor Corporation has reworked its anti-lock brake system to fix the brake issue on its Prius gas-electric hybrid cars, a senior official in charge of quality issues said yesterday.

Toyota called a briefing after news that it had received close to 100 complaints, mostly in Japan, concerning what drivers characterised as insufficient braking in the third-generation Prius hybrid model. The Prius is now Japan's top-selling model — a first for a gasoline-electric car.