Toyota (TM) Steps On The Gas With Recall While Share Price Brakes

 @ibtimes on January 28 2010 6:43 AM

Toyota Motor Corp. accelerated its massive recall of cars over fears of potentially malfunctioning gas pedals as shares continued to decelerate, tumbling from their high of $91.78 to under $79 in a little over a week.

The recall has now been expanded to include an additional 1.09 million vehicles in the U.S. (the 2008-2010 Highlander, 2009-2010 Corolla, 2009-2010 Venza, 2009-2010 Matrix, and 2009-2010 Pontiac Vibe). Already targeted cars include the 2009-2010 RAV4, 2005-1010 Avalon, certain 2007-2010 Camry, 2007-2010 Tundra, and 2008-2010 Sequoia.

All of this comes on the heels of Toyota’s announcement of a huge sales and production suspension of affected cars, and its original 2.3 million car recall. Production has been affected in several U.S. plants, and Toyota has informed Chinese authorities that it will start a recall of some 75,000 RAV4 sport utility vehicles made in China between March of 2009 and January of 2010. Toyota has not said whether cars in Europe will also eventually face recalls, but the same parts causing concern in the U.S. are in those cars.

Earlier, in November 2009, Toyota had recalled 4.2 million vehicles over concerns that floor mats might be creeping up on gas pedals causing unwanted acceleration. But the focus of the current recall includes the gas pedal itself, pedals that were manufactured by CTS Corp. in Elkhart, Indiana. It should be noted that, as early as 2007, Toyota had been getting reports of gas pedals being slow to rise after being pressed in some models.

Toyota says that actual cases of uncontrolled acceleration are rare, but is obviously concerned that its famed reputation for quality is at risk. In addition, it could affect the company’s earnings, which were just turning black after three quarters in the red.

Meanwhile, CTS Corporation (NYSE: CTS), maker of the suspect pedals, began circling the wagons, issuing a press release echoing what Toyota said about the rarity of the problem, and emphasizing that the pedals were manufactured according to Toyota’s own specifications:

“As has been publically stated by Toyota, we have no knowledge of any accidents or injuries that have resulted from this rare potential condition. Based on information that Toyota has provided us, we are aware of fewer than a dozen instances where this condition has occurred, and in no instance did the accelerator actually become stuck in a partially depressed condition.”

“As Toyota stated, this recall is different from and unrelated to the ‘sudden, unintended acceleration issue’ which was the subject of the November 2009 Toyota recall. In the November recall, the pedals in Toyota models dated back to model year 2002. CTS became a pedal supplier in 2005. Accordingly, our products are not implicated by the November 2009 recall. The products we supply to Toyota, including the pedals covered by the recent recall, have been manufactured to Toyota’s design specifications.”

CTS then went on to say that Toyota only represents about 3% of their total sales, and that a newly designed pedal is now being shipped to some Toyota factories.

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