Toyota Faces Second Multi-Million Vehicle Recall in Two Months Amid Quality Concerns

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Researched by Industrial Info Resources (Sugar Land, Texas)--The last few years have been difficult for Toyota Motor Corporation (NYSE:TM) (Tokyo, Japan). In 2011, Toyota faced severe setbacks thanks to earthquakes and a tsunami in Japan and massive flooding in Thailand. The year before, the automaker struggled through severe criticism and a major recall after concerns were raised about the brakes on its vehicles. That incident ended up with Toyota's leadership facing off with the U.S. Congress. 2012 was supposed to be the year that Toyota put it all back together, got on the ball, and reclaimed its spot on top of the automotive sector. While it has clawed its way back to the top slot in sales, Toyota is now announcing its second multi-million vehicle recall in two months.

Toyota has just announced a recall of 2.8 million vehicles over concerns about water pumps and a steering shaft defect. This comes on the heels of its 7.43 million vehicle recall announced a month ago, the largest recall by an automaker in 16 years. This latest recall could end up hurting the Japanese automaker more severely than the recall in 2010, as the latest involves a number of the popular Prius model vehicles. While Toyota is on top in the sales race for this year, quality concerns are going to begin to hurt the automaker as it heads into 2013. Competitors are certainly going to push new ad campaigns aimed directly at the quality of Toyota vehicles.

Japan also is facing sales problems in China, where consumers are boycotting Japanese goods as the two countries fight over a chain of uninhabited islands in the China Sea. Despite all of these setbacks, 2012 has been a good year for Toyota. The company No. 1 automaker in the world and recently boosted its sales forecast to the 10 million-unit mark for its fiscal year, which lasts until the end of March 2013. If the automaker can reach that 10 million-unit mark in sales, it will be a milestone for Toyota.

Toyota vehicles remain popular in the U.S. and Canada. The company has recognized that North America is a very important area of the world and has invested heavily in both the U.S. and Canada to ensure that it can cover demand. One positive result of the natural disasters of 2011 has been that Toyota, as well as other automakers, have made a conscious effort to move more of their supply chains to the U.S. and Canada to avoid potential work stoppages or slowdowns, such as they experienced in 2011. By having most of the parts for the vehicles assembled in the U.S. and Canada also manufactured in those countries, it lessens the potential for setback if the Japan faces another natural disaster.

Currently, Industrial Info is tracking close to 40 capital and maintenance projects worth an estimated $1.4 billion that are either in the planning stages, in engineering or under construction in the U.S. or Canada. These projects cover a wide variety of facilities and project activity from automotive assembly plant expansions, to foundry retooling, to grassroot components plants, to simple semi-annual maintenance projects. Toyota, despite the quality concerns, will continue to invest in North America as its sales continue to grow.

As with the end of each of the last several years, Toyota is hoping that 2013 will have an even brighter outlook, an outlook not marred by any natural disasters or quality issues. Toyota is likely to retain its hold on the No. 1 spot in worldwide sales, as no other automaker has the power to knock them out of that spot at this time. Toyota remains a highly popular brand, and that will only improve in the coming years. Spending is likely to increase as demand continues to rise in both the U.S. and Canada. While it is not likely that Toyota will commit to another new assembly plant in North America, it might consider expanding those assembly plants it already operates more in the near future if demand continues to rise. Toyota will address all of these recalls, and the double massive recall this fall should be a wakeup call for the automaker to take a closer look at its quality controls, so that this type of situation can be avoided in the future.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.