Toyota extends massive safety recall to Europe

Toyota said it had not yet determined how many vehicles in Europe would be recalled, or when, but media and analysts have said 2 million cars may be affected on top of some 6 million now recalled in North America.

The recall and a related sales and production halt in North America of eight models including its best-selling Camry have damaged Toyota's once unshakeable record for safety and reliability. It comes as its grapples with a patchy recovery from a vicious global downturn in the industry and growing competition.

Toyota's got the resources to bounce back from this, but this is the biggest crisis that they have ever faced, and Ford and Hyundai and others are coming on strong, said Jim Ziegler, an auto dealer consultant in Atlanta.

Shares of Toyota fell a further 4 percent in Tokyo trading on Thursday, taking losses since last week to more than 15 percent and wiping about $25 billion in value from Japan's largest company by market capitalization.

A Toyota Europe spokeswoman said the models and exact number of potentially affected vehicles was under investigation but there was no need to stop production.

Toyota late on Wednesday also offered to replace floor mats or pedals on another 1.1 million U.S. vehicles if customers wanted. With that voluntary measure, Toyota would be dealing with nearly 6 million U.S. vehicles for accelerator-related problems across its lineup, a sweeping safety action that has emboldened its rivals.

A further 2 million in Europe would take the total to 8 million, almost the same as its group global sales last year.

Cars sold in Japan do not use the parts in question.

RIVALS BENEFIT

Analysts said the financial damage to Toyota from the recalls would depend on how long it has to shut production on key models and how badly consumer confidence is shaken as reflected in pricing of both new and used cars.

The sales and production suspension could cost Toyota at least 50 billion yen ($553 million) in operating profit per month, said Koji Endo, auto analyst at Advanced Research Japan.

Toyota's operating profit in July-September was 58 billion yen.

Battered by a plunge in global sales brought on by the financial crisis, Toyota had been expected to post an operating loss of around 47 billion yen in the year to March 2010, before rebounding to a 599 billion yen profit in 2011, according to 19 analysts polled by Thomson Reuters I/B/E/S.

I am expecting 100 billion to 200 billion yen in operating profit this year, but it could end up in zero or a operating loss due to this sales and production suspension, Endo said. I suppose Toyota would suffer more next year because of a damage on its brand image.

Toyota said this week it expects a 6 percent rise in groupwide global sales to 8.27 million units in 2010, but according to a company spokesman in Tokyo, the outlook does not take this sales suspension into account.

RATINGS WATCH

Fitch said it was putting Toyota on watch negative.

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 Jeong Min Pak, Senior Director in Fitch's Asia-Pacific Corporates team. This could hamper the company's potential sales and profitability recovery, especially in the U.S. market.

Shares in Asian rivals Honda Motor and Nissan Motor rose 3.3 percent and 2.8 percent respectively. South Korea's Hyundai Motors, which beat expectations with a record profit for the fourth quarter, rose 4.1 percent.

Honda, Nissan and Ford Motor stand to benefit if Toyota experiences a prolonged sales slump, Kota Yuzawa, auto analyst at Goldman Sachs in Tokyo, wrote in a memo to clients.

Looking to gain from Toyota's slip, General Motors Co said on Wednesday it was offering Toyota customers payouts of up to $1,000 or zero-percent financing for up to five years on most of the GM line-up.

Hyundai, unlike GM, said it would not introduce any measures to lure customers from suffering Toyota, but analysts say it could be a following wind for a company already stealing market share.

Toyota's latest recall in the United States could help Hyundai's business there, said Park Jung-Seob, market strategist at Daeshin Securities.

($1=90.32 Yen)

(Additional reporting by Bernie Woodall, Kevin Krolicki, John Crawley and Helen Massey Beresford; Editing by Lincoln Feast)