Recall sucks out $800 million from Toyota’s bank balance

The recall by Toyota of around 6.4 million vehicles worldwide might be precautionary, but it will slash an estimated NZ$800 million off the carmaker’s first quarter profit, say investment analysts in the United States. Toyota won’t fit all the bill – it will share it with its suppliers, including its affiliated company Aisin Seiki, which made the potentially faulty seat rails involved in the recall. Toyota owns around 22 per cent of Aisin Seiki. Another supplier to Toyota has reportedly put aside NZ$65 million in provisions for costs. The recall also concerned a potential fault in an electric cable in the steering wheel column, which could deactivate the

driver-side airbag. It was Toyota’s second-biggest ever recall, trailing only the 7.43 million vehicles it called back in October 2012 to fix power-window switches on models including its Camry and Corolla cars. Toyota NZ will recall around 40,000 vehicles, made up of NZ-new RAV4, Prado, and Hilux models built between June 2004 and December 2010 and Yaris hatchbacks produced between January 2005 and August 2010. Used imports are also in the mix . The global recall couldn’t have come at a worst time for Toyota. Earlier this year, it recalled 2.1 million Prius, RAV4, Tacoma (US pick-up truck) and Lexus vehicles, because of a software problem that could cause the cars to stop suddenly.

That recall came only months after Toyota president Akio Toyoda said the carmaker was ready to go on the offensive again with a new global platform. It is called TNGA – Toyota New Global Architecture – upon which Toyota aims to be the first carmaker to sell more than 10 million vehicles in a calendar year. It sold 9.98 million in 2013, just ahead of General Motors and Volkswagen. Toyota said TNGA would cut development costs by between 20 and 30 per cent. But the ‘one size fits all’ policy, where common parts are used in as many as 50 per cent of vehicles, can create havoc when things go wrong. No company is more aware of this than Toyota, and the latest recall adds to its embarrassment. Toyota’s board member for research and development, Mitsuhisa Kato, late last year told media in Europe: “When you promote common parts, if quality problems occur [they] permeate throughout the world, so we have to be very cautious,” Kato said. “Never again we will allow Mr. Toyoda to appear in front of a US Congress.” Kato of course was referring to company president Toyoda’s humiliating appearance in February 2010 before US lawmakers to apologise for failures with accelerators and brakes on several models that led to deaths and worldwide recalls. Meantime, Toyota has unveiled two fresh petrol engines that will boost economy by a claimed 10 to 15 per cent. Both use an Atkinson burning cycle previously found only in the carmaker’s hybrid range. Toyota says the 1.3-litre four-cylinder and the 1.0-litre three-cylinder units offer more overall efficiency via stop-start technology, the Atkinson cycle, a rapid combustion process, and high compression ratio. The Atkinson cycle improves fuel efficiency but it lacks power. Toyota gets around that in its hybrids because it can boost engine power with oomph from the car’s battery-powered electric motor. How Toyota engineers have adapted the Atkinson unit to work in non-hybrids is unclear. It is also not saying which vehicles will get the new small-displacement engines, although they will probably be used in compact cars for the Japanese domestic market.