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Corolla probe threatens Toyota brand

Washington, February 18, 2010

Toyota Motor Corp braced itself for further damage to its brand on Thursday, as it waited to hear if a US probe into steering complaints would lead to another recall of its flagship Corolla model.

US regulators launched a preliminary probe on Wednesday into reported steering problems with Toyota's second most popular vehicle in the US market behind its Camry sedan.

Preliminary investigations are a common step by regulators and are often closed without leading to a recall.

Analysts said another recall would cost the company's reputation far more than it would cost directly in dollars.

So far the Corolla problem appears contained to the United States. Japan's transport ministry said there had been no complaints reported about the Corolla's steering system in Japan, adding that the model sold in Japan used different parts.

A Toyota Motor Europe spokeswoman said the version of the Corolla sold in Europe also used different steering, suspension systems and tyres.

The world's biggest carmaker said it was looking into complaints about the steering systems of the 2009 and 2010 Corolla models, of which some 550,000 have been sold in North America, but that it would only recall the car if the issue were deemed a safety risk.

But analysts and investors are worried about the damage renewed scrutiny on the Corolla, which is already subject to a recall for an accelerator pedal defect announced less than a month ago, could do to Toyota's brand and sales.

Toyota's safety woes are spiralling at a time when carmakers worldwide are struggling to emerge from a deep industry crisis that led to bankruptcies and consolidation.   

"Another recall of the Corolla may cost only 5 billion yen to 6 billion yen ($55 million to $66 million). But the Corolla is synonymous with the Toyota name," said Koji Endo, an auto analyst at Advanced Research Japan.
   
"Recalling the flagship model over and over again could damage Toyota's brand. I am afraid its customers might leave for rival cars."    

Toyota's quality chief, Shinichi Sasaki, said at a briefing in Tokyo on Wednesday that internal studies had shown that drivers had complained about a change in steering response versus older Corollas, possibly due to a switch from a hydraulic power steering system to an electronic one.   

He also said it was not yet clear if the problem was due to the steering, tyres or another part.   

In late January Toyota recalled 2.3 million vehicles in the US, including the 2009 and 2010 Corolla models, to fix faulty accelerator pedals. It has repaired about 500,000 cars so far, a Tokyo-based Toyota spokesman said.

Toyota is recalling about 1.7 million vehicles in Europe for problems linked to accelerator pedals as part of its wider global recalls.

A Toyota Motor Europe spokeswoman said the repairs were under way. The process may take around six months to complete but it was hard to estimate as the recall process worked differently in different countries, she added. - Reuters




Tags: Toyota | Japan | Corolla | carmaker |

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