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Toyota Motor Corp. (TYO:7203) Recalls its Cars

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Toyota Motor Corp (TYO:7203) will be recalling 5 7000 cars worldwide to replace the potentially deadly airbags that are made by Takata Corporation (TYO:7312). This is done so that the safety of passengers is not compromised. Toyota took the action of recalling its cars after its counterpart Honda recalled its cars from worldwide which had the same problem of faulty airbags that were also made by  Takata Corporation (TYO:7312). More than sixteen million cars have been recalled globally because of Takata’s air bag inflator that bursts on the exertion of too much force and sprays metal fragments into the car.

Toyota is going to recall some Yaris (sub compact version of Vitz) in some markets and it is going to recall the RAV 4 crossover models which were made between December 2002 and March 2004. About 4000 of the vehicles that are being recalled are in japan, 6,000 are in Europe whereas the rest are in markets outside North America. Toyota says that it is not aware of any deaths caused by any of its recalled vehicle. Toyota’s subsidiary Daihatsu also recalled 27571 Mira in Japan for the same reason of faulty Takata Corporation (TYO:7312) air bags.

The vehicles that the subsidiary recalled were made between December 2002 and May 2003. According to a transport ministry official, in japan only, 2.6 million vehicles have been recalled till now due to Takata’s Faulty airbag inflators. Takata Corporation (TYO:7312) related recalls are expected to increase as the US safety regulators have ordered Takata to expand its regional recall of driver side air bags to the whole of United States that would include areas that are less humid and have lesser chances for the air bag to burst.

Takata Corporation (TYO:7312) is resisting this expanded drive giving the reason that it would divert the replacement parts from the areas that needed it the most. Takata Corporation (TYO:7312) has been given a deadline till Tuesday by The U.S. National Highway Traffic Safety Administration (NHTSA) to issue a recall across the country and in case of not complying with it, Takata would have to pay a fine of $ 7,000 per vehicle. A US wide recall would cost around 70 billion yen ($600 million).

If Takata Corporation (TYO:7312) goes for a countrywide recall then there are high chances that it will come into a Cash flow problem. Takata’s share have dropped down to 7.9% in Tokyo stock market on Thursday, closing down at 4.8%. Toyota Motor Corp (TYO:7203) shares have just raised by a mere 0.5% whereas Daihatsu shares dropped down by 1.2%. Although shares of Honda Motor Co Ltd (TYO:7267) that is Takata’s best customer faced a decline of 3.3% and under performed with its competitors.

A transport ministry official said that no more recalls are expected in Japan related to Takata air bag incident. A second US congregational meeting is scheduled for Wednesday where the representatives from Takata Corporation (TYO:7312), NTHSA and numerous auto makers will testify.

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