Toyota faces criminal probe

 @ibtimes
on February 23 2010 7:40 AM

Toyota Motor Corp's woes deepened ahead of its testimony to Congress as it revealed it faces a U.S. criminal probe into the handling of its massive safety recalls, while Japan voiced concern over the economic impact of the automakers' problems.

New U.S. documents showed on Monday how the company beat back U.S. safety regulators' efforts for a wider probe in 2007 and disclosure of a U.S. Securities and Exchange Commission request for documents.

The news comes as Toyota's top executive prepared for a hearing on Capitol Hill over unintended acceleration problems that have been linked to at least five U.S. deaths, with 29 other fatality reports being examined.

In a gesture it said was intended to reassure customers, Toyota said it would install brake-override systems on three more models of vehicles already on U.S. roads: the Tacoma truck going back to the 2005 model year, the Venza crossover from 2009 and the Sequoia SUV from 2008.

Toyota has sold around 1 million units of the three vehicles combined dating back to the respective model years, based on rough estimates using sales figures provided by Toyota. Toyota declined to say how much it expected the installations to cost.

Morgan Stanley auto analyst Noriaki Hirakata wrote in a report last week the cost of installing brake-override systems was currently about $50 per vehicle. At that cost, Toyota could spend around $50 million for the move -- a relatively small sum for a company that had $58 billion in sales last quarter.

Shares of Toyota fell 0.5 percent on Tuesday in Tokyo, matching the Nikkei 225's fall, suggesting little investor reaction to news of the criminal investigation and the plan for the additional brake override upgrade.

Investors are not worried about such one-time costs. Instead they welcome Toyota's efforts to restore confidence in its products and its relations with the U.S. government regardless of the costs, said Yoshihiko Tabei, analyst at Kazaka Securities.

JAPAN EXPORT CONCERNS

A Japanese government official expressed concern about the effect Toyota's problems could have on Japan's exports.

Strong growth in Asia-bound exports seems to be slowing, and we also have to consider Toyota's recalls, so we've given a cautious judgment on exports, Keisuke Tsumura, a parliamentary secretary on economic affairs, said as the government issued a report on the economy.

Toyota has recalled more than 8.5 million vehicles globally in recent months for problems including sticky accelerators, accelerators that can be pinned down by loose floor mats and a braking glitch affecting its hybrid models.

It is also investigating reports of steering problems in the Corolla, its second most popular U.S. model.

Toyota's extra installation of the brake-override systems extends the scope and cost of a recall that had already targeted five models including the top-selling Camry. Toyota said it would have the same safety technology on most new models sold in the United States by the end of 2010.

PRELUDE TO TESTIMONY

Akio Toyoda, who took the helm at the world No. 1 automaker last June, is scheduled to testify before the U.S. House Oversight and Government Reform Committee on Wednesday.

In a preview of the line he could take in his testimony, Toyoda said in a statement published in the Wall Street Journal that he was committed to making sure that Toyota learned from the crisis and changed its ways.

It is clear to me that in recent years we didn't listen as carefully as we should -- or respond as quickly as we must -- to our customers' concerns, Toyoda said. While we investigated malfunctions in good faith, we focused too narrowly on technical issues without taking full account of how our customers use our vehicles.

The extended apology from Toyoda, a grandson of the company's founder, came hours after Toyota said it had received a federal grand jury subpoena from the U.S. attorney's office in Manhattan on February 8.

The automaker also said the SEC had asked for documents related to unintended acceleration of Toyota vehicles and the company's disclosure policies.

Toyota said it would cooperate with the investigations.

(Additional reporting by Chang-Ran Kim; Editing by Hugh Lawson and Lincoln Feast)

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