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Toyota recall a US$1b fix - Too late to prevent backlash, but brand remains popular, poll finds

Published:Wednesday | February 3, 2010 | 12:00 AM

Toyota Motor Corp's fix for the gas pedal problem that led to the recall of millions of cars has not come soon enough to prevent a consumer backlash in the United States and elsewhere that is battering its sales.

One of the automaker's top executives on Tuesday said the damage from the global recall of nearly 4.6 million vehicles may be greater than previous quality problems because of the massive scale.

"This is unprecedented in having caused this huge problem for customers," said executive vice-president Shinichi Sasaki, who oversees quality control at the world's Number 1 automaker.

He said it was too soon to put a number on the ultimate cost of the recall. But Tatsuo Yoshida, an auto analyst at UBS in Tokyo, estimated the recalls are likely to cost about US$900 million, and lost sales are already costing Toyota another US$155 million a week.

The recall to fix a gas pedal that can stick when depressed covers some 2.3 million vehicles in the United States alone, including some of Toyota's best-selling models, such as the Camry and Corolla.

The company has recalled millions more because of floor mats that can catch the gas pedal.

Toyota apologised to its customers Monday and said a piece of steel about the size of a postage stamp will fix the gas pedal problem. Repairs will take about a half-hour and will start in a matter of days, the company said.

The repair involves installing a steel shim a couple of millimetres thick in the pedal assembly, behind the top of the gas pedal, to eliminate the excess friction between two pieces of the accelerator mechanism. In rare cases, Toyota says, that friction can cause the pedal to become stuck in the depressed position.

Toyota insisted the solution, rolled out six days after it temporarily stopped selling some of its top models, has been through rigorous testing and will solve the problem for the life of the car.

Lack of information

After a week in which Toyota drivers said they were worried about the safety of their cars and dealers were frustrated by a lack of information, Toyota said it would work to regain the trust of its customers.

"This is embarrassing for us to have ... this kind of recall situation," Jim Lentz, president of Toyota Motor Sales USA, told reporters.

"But it doesn't necessarily mean that we have lost our edge on quality. But we do have to be vigilant. We have to redouble our efforts to make sure this doesn't happen again."

Earl Stewart, who owns a Toyota dealership in North Palm Beach, Florida, and had been critical of delays in getting repair parts to dealers, said he was happy with the fix. He said he was reassured that it had been tested by independent engineers, not just Toyota's.

"You never say you're absolutely sure about anything, but I feel that this is probably the answer," he said.

The National Highway Traffic Safety Administration said it had "no reason to challenge this remedy". Transportation Secretary Ray LaHood said last week the government had urged Toyota to issue the recall and suspend production.

Consumers smarting

Others, meanwhile, say consumers are still likely to be smarting.

Toshirou Yoshinaga, analyst at Aizawa Securities in Tokyo, said Toyota failed to move quickly enough.

"The top management should have gone public sooner to address the American public," he said. "The trust in Japanese quality, in Toyota, has been shaken."

However, an ABC News poll found that 63 per cent of Americans still rate Toyota favourably overall, and 72 per cent see the gas-pedal problem as an isolated incident.

About a quarter of people surveyed said the recall makes them less likely to buy a Toyota car. The poll was conducted by telephone January 28-31 and sampled 1,012 adults. It had a margin of error of four percentage points.

According to numbers Toyota released Tuesday, the recall covered 4.45 million cars worldwide - 2.48 million of them in North America, 1.71 million in Europe, some 80,000 in China and 180,000 in other regions, including the Middle East.

It estimated repairing all the recalled cars would take months. It said some dealers were planning to stay open around the clock to make the repairs once parts arrived. Parts were expected to begin arriving late Tuesday and Wednesday.

Toyota's European operations said the parts needed to fix the gas pedal problem will start arriving in Europe next week.

Generally after a recall, sales drop about 20 per cent in the first month and then gradually recover, said Sasaki. But he acknowledged the latest recalls were unprecedented in scope.

He denied there were any electronic problems in the vehicles being recalled in the US, as some have speculated. Toyota investigated and had "not found a single case", he said.

The company plans to restart US production February 8 on models covered by the recall - the Camry, Corolla, Avalon and Highlander cars, the Matrix hatchback, the Tundra pickup, the RAV4 crossover and the Sequoia SUV. The production was suspended starting Monday.

- AP