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Toyota Scuppers Its Own Sales Plan With Plant Closing News

Factories Shut, Production Of Eight Vehicles Idled
Action Linked To Unintended Acceleration Recall

It’s a public relations nightmare for Toyota.

One day Toyota announced in Toyo that it will restore its battered finances by raising global sales by six per cent in 2010. The next day in the U.S. Toyota said it will temporarily withdraw eight models in North America to make sure they aren’t subject to unintended acceleration.

Toyota’s finances are under pressure. It has lost $7.1 billion over the last couple of years, and it wants to return to profitability in the financial year starting in April. Toyota wants to raise sales to 8.27 million in 2010, up from 7.81 million in 2009, and compared with 9.37 million in 2007.

But it will have to make do without North American made vehicles including Camrys, Corollas, RAV4s, Tundras, Avalons, Highlanders and Sequoias for a week starting February 1, while Toyota engineers make sure they won’t be subject to the jammed accelerator problems which led to an initial recall of 2.3 million vehicles which later widened to a total of 4.2 million.

Investors, as well as car owners, are not happy.

Deutsche Bank said the shutdown involves capacity of about 1.15 million, or 60 per cent of its North American total.

A couple of days later, Toyota extended the recall to Europe, but didn’t say which models were involved. It would contact its customers, Toyota Europe said.

No clarity
“There is still a lack of clarity on the duration of the production shutdown and sales suspension, whether this will be global – Japan has so far been excluded – and the full financial impact,” Deutsche Bank said.

The vultures, in the form of Ford, Hyundai and Kia and others are lurking.

“Of more concern however is the negative impact on brand image that could far exceed that of an isolated recall. Near-term market share will likely suffer,” the bank said.

One analyst in California, asked to comment on Toyota’s plan to raise sales six per cent was quietly confident.

“All in all, it’s probably an achievable target,” he said.

One day later, Toyota torpedoed its own plans with the shutdown news.


Neil Winton – January 30, 2010

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