If you think that champagne corks are popping after Toyota Motor Corporation (NYSE:TM)’s recent coronation as the world’s largest automaker you cannot be more wrong. Right after the company made headlines with the news that it has surpassed General Motors Company (NYSE:GM) producing 9.75 million vehicles in 2012 against the latter’s 9.29 million Toyota finds itself in the midst of yet another recall disaster. Last week the company announced that it plans to recall 7.43 million vehicles across the globe. While this does not dent the company’s bottom-line by more than $55 million, it does dent the faith of the investors on the world’s largest automaker.
The recall saga
Toyota’s recall woes date back to August 2009 when a Lexus ES350 crashed and caught fire in Southern California killing off-duty California Highway Patrol officer Mark Saylor and three of his family members. The company cited wrong floor mats to be the problem which was interfering with the gas pedals and recalled 4.2 million Toyota and Lexus vehicles to fix the same. This was the first time that the faith on the unshakable Toyota faltered and the CEO’s public apology to the Saylor family was a small measure to repair the face loss. The company desperately tried to cling on to the floor mat theory to explain the series of complaints that followed involving unintended acceleration only to suffer the next blow in 2009. On Dec. 26, 2009 a Toyota Avalon crashed into a lake in Texas after accelerating out of control killing all four passengers. And guess what - the floor mats were found in the trunk of the car!
Over the next two years what followed were more and more recalls. Sometimes floor mats sometimes gas pedals unintended acceleration was becoming a menace for Toyota vehicles. Promises made by the company to improve its quality control were falling short by miles. Between 2009 and 2010 Toyota recalled as many as 14 million vehicles across the world and President Akio Toyoda was made to appear before the US Congress to explain the safety concerns.
And just when it was thought that the worst is behind, the company announced the largest recall in the past 16 years in the automobile history and biggest since Ford Motor Company (NYSE:F)’s recall of 7.9 million vehicles in 1996. The recall affects vehicles sold across the world under Toyota and Scion brands. The US alone would see the recall of 2.5 million vehicles while the figure for Europe would be 1.4 million. Australia, China, other parts of Asia, and the Mideast would all be impacted. The problem this time is a potentially defective power window switch on the driver’s side which poses a risk of fire. While it is a small relief that the models affected are all from 2009 or earlier vintage this to say the least puts the company under the scanner all over again.