Toyota Recall Comes Amid Safety Clampdown - Wall Street Journal

Toyota Motor Corp. said it would recall 6.39 million vehicles world-wide, another in a wave of recent recalls by major auto makers on the heels of clampdowns on vehicle safety by regulators in the U.S., Japan and China.

Toyota's recall involves 27 vehicle models, including the Corolla, Yaris, Matrix compact cars and RAV4 and Highlander sport-utility vehicles. The recalls were prompted by defects covering seat rails to engine starters.

Engine-starter defects led two vehicles in Japan to catch fire, but Toyota said it wasn't aware of any crashes, injuries or fatalities caused by the problems that prompted the latest recalls.

Problems with the spiral-cable assembly that can disable air bags affect 3.5 million vehicles, including 1.67 million in North America. Those involving seat rails that could slide forward in a crash affect 2.32 million vehicles globally, including 670,000 vehicles in North America.

A Toyota spokeswoman in Tokyo said Wednesday that the company issued five recalls simultaneously "in line with our policy to disclose safety-related issues promptly." She said it had previously issued two or three recalls at once.

The recalls come weeks after Toyota agreed to pay a $1.2 billion criminal fine to settle a U.S. probe in which Toyota acknowledged misleading consumers about safety problems related to unintended acceleration in a number of its vehicles.

They also come as the tempo of auto-safety recalls have risen in the U.S., Japan and China. A year ago, China's quality regulator triggered a recall of nearly 400,000 Volkswagens for defective gearboxes. In the intervening months, voluntary recalls by major brands including General Motors Co., Ford Motor Co. and BMW AG amounted to 1.8 million vehicles combined.

Complaints of sudden acceleration in Toyota and Lexus models resulted in the recall of millions of vehicles world-wide from 2009 through 2011. In the U.S. Justice Department settlement, Toyota acknowledged that it had produced and sold vehicles even after it discovered safety problems, including a pair of issues that caused some cars to accelerate uncontrollably.

Toyota's latest recalls comes as the U.S. Justice Department is ramping up an investigation into General Motors's delays in recalling a faulty ignition switch that has been linked to 13 deaths in which air bags failed to deploy.

U.S. federal auto-safety regulators criticized GM this week for failing to answer questions about its ignition-switch recall, fining the company $7,000 a day until it fully responds to a series of questions, and warning it could seek stiffer penalties in federal court. The auto maker discovered the problem with the switches in 2004 but didn't act until earlier this year, when it recalled 2.6 million vehicles world-wide. During the past several weeks, the company recalled 6.3 million vehicles for several defects, including the ignition-switch.

The latest recalls also follow Toyota's global recall of 7.4 million vehicles in 2012 due to a potential fire hazard involving power-window switches—the company's largest-ever for a single part.

Peter Shervington, an expert in product liability at global law firm Eversheds, said the impact of the latest recalls on Toyota's brand image, employee morale and investor confidence could be more damaging than the direct costs of the recalls.

"Each announcement puts another dent in Toyota's efforts to recover its reputation and resurrects questions about the impact of its strategy of rapid expansion on previously enviable standards of design and production quality," he said.

Toyota had been working to regain customers' trust. Toyota President Akio Toyoda said last month that the company had been stepping up efforts to improve its customer service regarding vehicle safety but was standing "on the starting line."

Mr. Toyoda also said that Toyota, and car makers overall, were becoming more proactive in their recalls—pulling vehicles back and replacing parts to address consumers' safety concerns, even though they may not be officially required to do so.

Toyota's settlement and the GM investigation mark a shift by the U.S. government toward dealing with auto safety issues as potential criminal matters. Auto makers for decades have fought efforts by watchdog groups to criminalize safety issues.

Toyota had been regaining its strength after several difficult years that included a plunge in demand after the global financial crisis, the previous recalls, a strong yen and natural disasters in Japan and Thailand that hit production.

In February, Toyota said net profit in the quarter ended December rose more than fivefold from a year earlier to $5.2 billion, helped by solid sales and a weaker yen.

For the full fiscal year ending March, Toyota raised its outlook for net and operating profit to ¥1.9 trillion ($18.7 billion) and ¥2.4 trillion, respectively. Both surpass the company's previous record set in fiscal 2007.

Toyota's shares were down 3.1% at the close of trading Wednesday on the Tokyo Stock Exchange.

Write to Hiroyuki Kachi at hiroyuki.kachi@wsj.com



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