As Toyota Recalls 8 Models – Stock Takes A Beating

By Audrey Howard on January 29, 2010, 7:58 am

Toyota’s stocks continue to take a beating amid massive recalls. Stock price dropped 3.9 percent Thursday down to 3,560 yen as investors continue to ditch shares. This comes on the heels of a 4.3 percent drop on Wednesday. “It is still uncertain how this recall problem will affect Toyota’s profits,” said Mizuho Investors Securities Company’s market analyst Masatoshi Sato. “But investors are worried it could really pressure the company’s overall earnings.”

Recalls Continue

Toyota’s recall was expanded Thursday to include an additional 1.09 million automobiles in the US. This recall is because of problems that involve floor mats and gas pedals. According to Toyota this recall will affect the following five models:

• 2008-2010 Highlander
• 2009-2010 Corolla
• 2009-2010 Venza
• 2009-2010 Matrix
• 2009-2010 Pontiac Vibe

This new recall comes after Wednesday’s announcement that Toyota would be suspending sales in the U.S. of eight models in order to repair gas pedals that could stick and cause sudden acceleration. Toyota has stated that the pedals could become warn and cause rapid acceleration even when applying the break. The recall last week involved the same eight models and affected 2.3 million vehicles. Those 8 models are:

• 2007 to 2010 Tundra
• 2005 to 2010 Avalon
• 2010 Highlander
• 2009 to 2010 RAV-4
• 2009 to 2010 Corolla
• 2009 to 2010 Matrix
• 2007 to 2010 Camry
• 2008 to 2010 Sequoia

Financial Outlook

This is a hard blow for the automaker since the U.S. is Toyota’s largest market. Suspending the sales in the U.S. could really hurt the company which only just came back into the black after a 3 quarter losing streak. Fitch Ratings, a global rating agency in the world’s financial and credit markets, warned Thursday that the sales suspension in the U.S. and the recent recalls could hamper Toyota’s financial recovery. Fitch also put Toyota’s “A+” credit rating on a watch for possible downgrade. A lower credit rating might mean an increase in the interest rate that Toyota has to pay on outstanding debt.

 

“The recalls and sales and production suspension cast a negative light on Toyota’s reputation for quality, just as the company emerges from an unprecedented downturn in the auto industry,” said a representative for Fitch. The latest recall fiasco comes just months after Toyota recalled more than 4 million vehicles. That recall was over concerns that the floor mat might catch on the gas pedal and cause rapid, unexpected acceleration.

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3. GM Announces Incentives While Toyota Scrambles
4. Yet Another Toyota Recall – This Time Trucks
5. Recall Alert: Auto Maker Toyota Recalls 1.53 Million Cars