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Toyota Motor Corp. share price up, launches a massive recall

Toyota Motor Corp. said it would recall more than a million vehicles globally to address three separate defects, two months after being placed under more strict supervision in the U.S.

The car manufacturer said a total of 1.75 million cars will be recalled. Around 1.05 million vehicles will be pulled back from Japan and 750 000 overseas.

The Lexus and Crown luxury sedans are some of the units being recalled, as Toyota deals with problems related to the fuel suction plate, fuel delivery pipes and brake master cylinders. In an e-mail the Japanese car maker said that it was not aware of any injuries, crashes or deaths related to the defects.

Dion Corbett, a company spokesman, said that they have received the first report about problems with the cars back in June 2010 from the U.S. In an e-mail cited by Bloomberg he wrote: “A single initial report cannot identify a trend and rarely prompts a recall. When we see what might be a trend and investigate the issue, and when we believe there is a safety-related defect, we begin a recall.”

Other models that are being withdrawn are Toyotas Crown Majesta, Crown, Noah, Voxy, Corolla Rumion, Auris and some Lexus models.

A flaw in the design of the groove inside the brake master cylinder that could make them less effective over time is the main reason 802 000 vehicles are called back in Asian markets, more than 700 000 of which in Japan.

Improper function of the fuel suction plate affected around 190 000 Auris and Corolla cars. About 759 000 vehicles have increased fire hazard due to a possible leak from the fuel delivery pipes, 423 000 of which are in the U.S.

Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management said that he doesnt expect repair costs to rise significantly, since the fixes are clear and Toyota should be able to deal with the recall quickly. “The key issue is how fast Toyota responds to these problems so it can control reputational risk.” he added.

Japans car maker is meanwhile facing investigation from U.S. safety regulators. Allegedly the brakes of 1.7 million Corollas may fail to stop the vehicle in time to prevent a crash, an event also called “low-speed surging”. At the time Toyota agreed to co-operate with National Highway Traffic Safety Administration.

Toyota Motor Corp. gained 0.20% on Wednesday and closed at JPY5 990, with a day high of JPY6 015 and a day low at JPY5 964, marking a one-year change of -6.26%. The company is valued at JPY20.43 trillion. According to the Financial Times, the 23 analysts offering 12-month price targets for Toyota Motor Corp. have a median target of JPY7 550, with a high estimate of JPY9 400 and a low estimate of JPY6 500. The median estimate represents a 26.04% increase from the last price of JPY5 990.

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