Toyota's Accelerating Crisis: $2-Billion Price Tag and Counting

The price of Toyota's defect fiasco has reached a staggering $2-billion and is growing by the day, as the Japanese car maker faces a U.S. government investigation into the brakes of its prized Prius hybrid. The crisis has not only affected Toyota's reputation but has also raised concerns about the safety of its vehicles. The company's recall crisis has spread beyond its own borders, with at least one other auto maker, Ford Motor Co., taking action to address similar braking issues on its own hybrids.

Key Takeaways:

• Toyota's recall crisis has already wiped out over $23-billion worth of its stock market value, and the company is facing at least a dozen lawsuits in Canada and the United States.
• The hybrid braking issues are likely to add to the damage for Toyota, which has launched a probe into its luxury Lexus hybrid in Japan and the United States.
• Toyota is expecting to lose 100,000 vehicle sales because of the recall fallout, with 80,000 of them in North America, costing the company $1.1-billion for repairs and $770-million to $880-million in lost sales.
• Analysts warn that it could take years and billions more to restore Toyota's standing among car buyers, built up over three decades as an export powerhouse.
• The company is already gearing up to sell the public, once again, on the reliability of its products, with senior managing director Takahiko Ijichi stating that "quality is our lifeline" and that the company wants its customers to feel safe and regain their trust as soon as possible.
• The best-case scenario for Toyota is that the damage is already contained, and the bill will be limited to $2-billion or $3-billion, but experts warn that another possibility is that Toyota has finally taken on too much complexity and the damage may be much worse.
• Timeline of events:

+ Toyota recalled eight million cars worldwide over sudden acceleration problems since late last year.

+ The U.S. National Highway Traffic Safety Administration launched a formal investigation into the braking problems on the 2010 Prius yesterday.

+ Japan's Nikkei newspaper reported that Toyota is poised to recall 270,000 gas-and-electric Prius vehicles sold in the United States and Japan between May and December of last year.

+ Ford Motor Co. said it will pay for a software fix to correct braking issues on its 2010 Mercury Milan and Ford Fusion hybrids.

• Programs and initiatives mentioned:

+ Toyota's luxury Lexus hybrid probe in Japan and the United States.

+ Ford's software fix to correct braking issues on its 2010 Mercury Milan and Ford Fusion hybrids.

Statistics:

• $2-billion: The price tag of Toyota's defect fiasco.
• $23-billion: The amount of Toyota's stock market value that has been wiped out.
• 100,000: The number of vehicle sales Toyota is expecting to lose because of the recall fallout.
• 80,000: The number of vehicle sales lost in North America.
• $1.1-billion: The cost of repairs for Toyota.
• $770-million to $880-million: The estimated cost of lost sales for Toyota.
• 270,000: The number of gas-and-electric Prius vehicles that Toyota is poised to recall.
• 2010: The model year affected by the braking problems.
• 8 million: The number of cars recalled by Toyota worldwide over sudden acceleration problems since late last year.

Sources:

• Reuters
• The Globe and Mail