Toyota Motor Corp extended its safety recall of millions of its most popular cars to Europe and China on Thursday in a further blow to the reputation of the world's largest auto maker.
The scale of the fix for potentially dangerous accelerator pedals emboldened rivals and could land the Japanese carmaker with hundreds of millions of dollars in extra costs per month.
Toyota, a byword for quality and reliability, said it had not yet determined how many vehicles in Europe would be recalled, or when, but media and analysts believe 2 million may be affected on top of some 6 million in North America.
In China, the world's biggest auto market in 2009, the carmaker said on Thursday it had submitted an application to recall over 75,000 RAV4 vehicles.
All the cars being recalled in North America, Europe and China have pedals made by supplier CTS Corp.
The move comes as Toyota grapples with a patchy recovery from a vicious global industry downturn 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.
Toyota shares fell a further 4 percent in Tokyo on Thursday, taking losses since last week to over 15 percent and wiping about $25 billion from the value of Japan's largest company by market capitalization.
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 range.
A further 2 million in Europe would take the total to 8 million, almost the same as its group global sales last year.
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.
Cars sold in Japan do not use the parts in question.
RIVALS BENEFIT, DEALER FEARS
Analysts said the financial damage to Toyota would depend on how long it has to shut production and how badly consumer confidence hits its dealer network in the United States.
The health of the dealer network is critical, said Nomura analyst Michael Tyndall, especially if dealers sought compensation for missed sales.
Koji Endo, auto analyst at Advanced Research Japan, said the sales and production suspension could cost Toyota at least 50 billion yen ($553 million) in operating profit per month.
Battered by a plunge in global sales, Toyota was 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 analysts.
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.
Toyota said this week it expects a 6 percent rise in group global sales to 8.27 million units in 2010 but a company spokesman said this did not take into account the sales suspension.
Ratings agency Fitch, placing Toyota on watch negative, said the recalls and production suspension damaged Toyota's reputation for quality and could hamper its recovery.
Shares in Asian rivals Honda Motor and Nissan Motor rose 3.3 percent and 2.8 percent respectively. South Korea's Hyundai Motor, 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.
General Motors Co has also sought to profit, offering Toyota customers payouts of upto $1,000 or zero-percent financing on most of its line-up.
Nomura analyst Michael Tyndall said the recall could benefit all fellow players in the European auto market, with Nissan and Honda set to gain in particular.
It's probably the Asian manufacturers that will do best out of it but I think it probably favors everyone.
(Reporting by Soyoung Kim, Chang-Ran Kim, Bernie Woodall, Kevin Krolicki, John Crawley, Michael Wei, Simon Rabinovitch and Helen Massy-Beresford; Editing by Lincoln Feast)