Toyota to cut U.S. output further after recalls

on February 16 2010 3:40 PM

U.S. regulators on Tuesday opened an investigation into whether Toyota Motor Corp acted in a timely way to recall cars for acceleration problems, and the automaker moved to slow its U.S. production to avoid a costly ballooning of inventories.

The National Highway Traffic Safety Administration said it had requested production data, consumer complaints and other documents expected to shed light on how and when Toyota learned of problems affecting about 6 million vehicles it has recalled in the United States.

The NHTSA review could lay the groundwork for officials to fine Toyota if they determine the manufacturer violated its legal obligations. It also sets the stage for a congressional review of Toyota's safety crisis set for next week.

Toyota takes its responsibility to advance vehicle safety seriously and to alert government officials of any safety issue in a timely manner, said Toyota spokeswoman Cindy Knight. We are reviewing NHTSA's request and will cooperate to provide all the information they have requested.

Separately, Toyota said on Tuesday that it would shut down production at two of its U.S. assembly plants for a total of at least 11 days as it grapples with slower sales.

The move by U.S. officials to deepen the scrutiny of the world's largest automaker comes a day after safety regulators said the number of reported fatalities linked to unintended acceleration in Toyota vehicles had risen to 34.

Safety advocates have criticized Toyota and NHTSA for not acting more aggressively to investigate a rising number of consumer complaints of unintended acceleration on Toyota vehicles dating back to 2002.

By requesting more information from Toyota now, NHTSA has effectively reversed a decision taken by working-level investigators in 2004 that the automaker was not required to share information it had about reports of unintended acceleration lasting more than a few seconds.

Since December, NHTSA has been pushing Toyota to move faster in addressing safety concerns, both officials and Toyota executives say.

The three recalls being examined for their timeliness by NHTSA involve Toyota and Lexus models. Two of them -- in 2007 and 2009 -- relate to loose floor mats that can become trapped by the accelerator. The third, announced in January, covers gas pedals that do not spring back as designed.

Toyota's production shutdowns, which cover its San Antonio, Texas, and Georgetown, Kentucky, plants, represent the second time the automaker has had to cut North American output.

Toyota faces a sales decline in the United States, its biggest and usually most profitable market, after the recall of more than 8.5 million cars worldwide since late 2009 for three separate defects.

CONGRESSIONAL HEARINGS LOOM

Any fines that would be imposed on Toyota by safety regulators would be capped at $16.4 million under U.S. law.

Congressional investigators are also looking into Toyota recalls as well as the handling of those matters by NHTSA dating back to the Bush administration.

Two hearings are set for next week and a third the week after.

Like other major automakers, Toyota books revenue when it produces vehicles and ships them to dealers. By cutting output, it is choosing to take a sales hit to keep inventories of unsold vehicles from rising.

Toyota's U.S. sales dropped 16 percent in January to the lowest level in more than a decade after the company suspended sales of about half of its inventory of vehicles due to accelerator problems.

A further sharp decline is expected for February since Toyota dealers expect that repairs to inventory will take most of the month to complete.

Toyota's San Antonio plant, which makes the Tundra pickup truck, will be closed during a week in March and a second week in April, Toyota spokesman Mike Goss said in an email.

That time will be used to install equipment in the plant to produce the smaller Tacoma pickup truck, he said. Tacoma production will be shifted from a Fremont, California, plant that Toyota previously announced would be shuttered.

Previously, Toyota planned to use weekends to install the Tacoma production equipment without disrupting Tundra output, Goss said.

In addition, Toyota's Georgetown plant, the automaker's largest assembly plant in North America, will be shut down on February 26. The plant could also be idled for a few additional days in March, Goss said.

During the first week of February, Toyota halted North American production of eight models covered by a recall for potentially sticky accelerator pedals.

That production halt covered six plants in the United States and Canada, including Georgetown. Output at the plants resumed on February 8, as planned.

Toyota's U.S. executives told dealers on Monday they were planning an aggressive marketing and incentive program for March to keep customers from defecting to other brands.

Steps being considered include a $1,000 rebate in addition to the $1,000 cash incentive being paid to returning Toyota customers as a loyalty reward, according to one person briefed on the still-developing plans.

Other options under consideration include a free maintenance program -- including oil changes -- or an expanded warranty program that matches the 10-year, 100,000-mile powertrain warranty offered by Hyundai Motor Co, the source said.

Toyota President Akio Toyoda and quality chief Shinichi Sasaki are scheduled to hold a briefing in Tokyo on Wednesday on the progress of the recall of the Prius for a glitch in the braking system.

(Reporting by John Crawley in Washington and David Bailey in Detroit; Additional reporting by Nathan Layne in Tokyo and Kevin Krolicki in Detroit; editing by John Wallace)

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