Toyota's global recall to cost $2 billion

06 Feb 2010

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Toyota, the world's biggest car maker's two massive recalls, which reached more than 8 million vehicles globally because off defective accelerator pedals, will cost the company about $2 billion in repairs, lawsuits and a battered and bruised image.

The cost of the more than 8 million vehicles recall does not include the cost that will be incurred in the recall of 270,000 new 2010 Prius hybrid model over the failure of the braking system, or the company's assumed loss of $1 billion in 100,000 new vehicle sales globally and the cost of potential payouts to be made in lawsuits already filed and to be filed by its customers.

The $2 billion loss has effectively wiped out the Japanese auto maker's last quarterly profits, while its stock price has slumped 23 per cent in the last two weeks and forced Toyota president Akio Toyoda, grandson of Toyota's founder to come on a Japanese TV to apologise and take personal responsibility for the crisis.

The Japanese business daily, Nikkei said yesterday that the carmaker is recalling 270,000 new 2010 Prius hybrid, its best-selling model in Japan and the fourth-best selling vehicle in the US, due to brake related problems.

This week, Toyota said that it has received 14 brake-related complaints on its latest Prius hybrid model on inconsistent brake action when driving over potholes, bumpy and frozen roads. (See: Toyota's woes now extend to Prius hybrid brakes)

The Japanese government had asked the carmaker to look into 77 reported cases of braking problems in the Prius models sold in country, while the US Department of Transportation has ordered an inquiry yesterday after having received 100 similar complaints.

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