Toyota’s Huge Recall Is Not The Biggest Risk It Faces

Forbes – Toyota Motor is recalling 7.4 million vehicles worldwide, including 2.5 million in the U.S.,  to fix power window switches that could catch fire. While that’s a staggering number — the largest single recall since 2006 — for Toyota owners it’s more of an inconvenience than a life-threatening safety issue.

Compared to the sticky accelerator problem that plagued Toyota in 2010, a sticky window switch is a minor thing. Back then, Toyota owners were afraid to drive their cars because of a few well-publicized cases in which Toyotas raced out of control on the highway and crashed, killing their occupants. Those were real tragedies, leading to the ultimate recall of 11 million cars and trucks worldwide.

In this case, nobody died from trying to operate their car window. And chief executive Akio Toyoda won’t be hauled in front of Congress to explain why his company’s window switches have a tendency to overheat.

But it’s an embarrassment that comes at an unfortunate time. Toyota has bounced back from the previous hit to its reputation and a series of other problems, including last year’s earthquake and tsunami in Japan and floods in Thailand, which crippled its supply chains. It recently posted its biggest quarterly operating profit in four years.

Still the latest recall isn’t even Toyota’s biggest problem. “Right now, increased competition and China should pose greater threats for the company,” said Jessica Caldwell, senior analyst at In China, the world’s biggest automotive market, Toyota and other Japanese brands have seen sales collapse as a result of anti-Japan protests.  Toyota said Tuesday that its China sales fell 48.9 percent in September compared to a year ago. Sales in China account for about 12 percent of its total.

The recall, on top of such worries, triggered S&P Capital to lower its opinion on Toyota’s NYSE-traded ADRs (American Depository Receipts) from a buy recommendation to hold. “Although we have not yet quantified the financial impact, we lower our opinion to reflect headline risk we see from increased headwinds in certain parts of its operations,” wrote S&P equity analyst Efraim Levy. The recall, he said, “takes some of the sheen off its recovering brand image and should have a financial impact, in our view.”

Toyota said the driver’s side window on certain vehicles may experience a “notchy” or sticky feel during operation, a result of uneven application of a lubricant by the switch supplier. The repair will take about one hour, the company said.

Here is a complete list of the vehicles affected.


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