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Toyota Exonerated By U.S. Safety Authorities

News Will Boost Toyota Image In U.S., Revive Sales
Company Raises Profit Forecast, As Yen Strength Abates

At last, some good news for Toyota, the world’s biggest car company in terms of sales, and much else besides. The U.S. safety authorities announced that the technology in Toyota and Lexus vehicles was not responsible for crashes said to have been caused by “unintended acceleration”. It seems likely that the crashes, which revived memories of Audis problem in the 1980s, were actually caused by human error involving trapped floor mats and confusion with accelerator pedals.

After asking NASA scientists to examine Toyota technology, the National Highway and Traffic Safety Administration exonerated Toyota.

“Isolated causes of sudden acceleration were either human error, pedal entrapment by the floor mat, or a ‘sticky pedal”, the NHTSA said. After news of the crashes went viral, Toyota lost a huge amount of sales and its reputation was trashed.

“It is positive that Toyota will get public redemption and will help Toyota battle various pending lawsuits. Toyota is not, however, out of the woods as perception is stickier than reality. We should not expect Toyota’s U.S. market share to recover to the 17 per cent range overnight,” Deutsche Bank said in a report.

Toyota’s U.S. market share dived to close 12 per cent in 2010, after news of the problems.

If the U.S. media reaction is anything like Neil Cavuto’s of Fox News, Toyota will soon be back on track.

“Where is the apology from the U.S. government,” said Cavuto in his nationwide daily programme, making the point that Toyota’s reputation had been severely damaged, and it had been forced to incur huge costs by charges that didn’t stand up.

Profit forecast raised
Meanwhile in Tokyo, Toyota raised its profit forecast for the current financial year by 40 per cent, reflecting stronger demand in Asia and a weakening in the value of the yen. Toyota now expects to earn $5.97 billion in the year ending next month, about twice what it made in the previous year.

According to the Financial Times’ Lex column, the weakness of the dollar against the yen was much more of a concern to Toyota shareholders than the NHTSA shenanigans.

“Toyota remains that very Japanese corporate specimen: the world-beating value destroyer. Vague signals that it will put less focus on market share and take more steps to relocate production are hardly more reason to buy the shares than improved guidance. An investment in Toyota today is, aside from the company’s relative cheapness, a play on exchange rates and global vehicle sales. There are less frustrating ways to bet on both,” Lex said, without elaborating.


Neil Winton – February 15, 2010

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