Not surprisingly, Toyota Motor Corp.”s stock price fell amidst their recent massive recall that affected over 5 million vehicles. The stock has dropped a total 15 percent in 8 days amidst concerns that Toyota’s reputation for quality may be permanently tarnished. Toyota’s “reputation for long-term quality is finished,” said Maryann Keller, senior adviser at Casesa Shapiro Group LLC in New York, a strategic adviser to the auto industry. “People aren’t going to buy Toyotas, period. It doesn’t matter which model. What’s happened is sufficient to keep people out of the stores,” she said in an interview yesterday.
The recall which originally effected eight models that account for more than half of dealer inventories, was expanded yesterday to include 4 more Toyota vehicles, and GM”s 2009-2010 Pontiac Vibe, a badge-engineered version of the Toyota Matrix.
Given the current climate of the auto-industry, the recalls present a much welcomed scenario for the other manufacturers as Hyundai”s shares rose 4.1% in value, and Honda and Nissan both gained 3.3% and 2.8% respectively. Ford and GM are also both offering incentives to customers who switch from the feeble Toyota brand to theirs.
Estimates put the sales of the recalled models at about 70% of Toyota-brand U.S. sales, and 56% of overall U.S. sales which includes Lexus vehicles.
IHS Global Insight analyst John Wolkonowicz believes this is only the start of a severely grim situation for the world”s top automaker. The U.S. represents Toyota”s largest market, accounting for more than half of global operating income. “This is the biggest crisis in the auto industry since the bankruptcies of GM and Chrysler,” he said. “Toyota is not going to be able to contain this problem in a short period of time.”
No figures are available yet on deaths and accidents related to the most recent recall, but Toyota is aware of five deaths directly related to the floor mat recalls of November.
- By: Stephen Calogera
Source: BusinessWeek
