DETROIT (AdAge.com) -- The resiliency of the Toyota brand is being sorely tested this week as questions build in the wake of its massive recall.
Automotive News, citing a U.S. Transportation Department official, today reports the automaker is facing a possible multimillion-dollar federal fine for failing to issue timely recalls of defective vehicles. The department, headed by Secretary Ray LaHood, is considering a civil penalty against the automaker, said the official, who asked not to be identified.
Automakers that fail to recall defective vehicles in a timely manner are subject to fines of up to $16.4 million. Toyota had one recall in October and another in January. "We have not received any official communication from NHTSA, so we are unable to comment at this time," Toyota spokeswoman Cindy Knight said in an e-mail to Automotive News.
Mr. LaHood said officials from the National Highway Traffic Safety Administration flew to Japan in December "to remind Toyota management about its legal obligations" and followed up in January with a meeting at Transportation Department headquarters in Washington "to insist that they address the accelerator-pedal issue." Mr. LaHood added: "While Toyota is taking responsible action now, it unfortunately took an enormous effort to get to this point."
Separately, Auto News reports that Toyota has been ordered by Japan's Ministry of Transportation to investigate a rash of consumer complaints about braking problems in its popular third-generation Prius hybrid vehicle.
The Japanese car maker has received several complaints about braking in the Prius, both in Japan and North America, since the end of last year, Toyota spokeswoman Ririko Takeuchi told the publication. She did not say when the directive was issued or how Toyota would respond. She also declined to give a figure for the number of complaints but said most were filed since the end of last year.
In total, Toyota's late-January safety recall of 2.3 millions vehicles in the U.S. cost its retailers 20,000 unit sales for the month, Toyota Division General Manager Bob Carter said. Toyota Division's January sales, including Scion's, fell 19% from January 2009 to 83,279 cars and light trucks, compared with 102,565 a year ago. Lexus Division sales rose 5% in January to 15,517 vehicles. Mr. Carter told reporters yesterday in a conference call that the Toyota numbers came in 23% below the brand's own internal forecasts for the month.
Honda lifts guidance
Meanwhile, rival Honda lifted its annual guidance far beyond market expectations today after cost cuts drove quarterly profit to the strongest in a year and a half. The automaker said it anticipates further growth in the next fiscal year. With its car sales roughly on track to reach 3.6 million vehicles next business year, a top executive said Honda should be able to make an operating profit of about $1.1 billion per quarter, providing a rare insight into the outlook for the financial year starting on April 1.
Though there is some betting that Honda could benefit from the global recall of millions of vehicles by larger rival Toyota, some analysts said the opposite could also happen. "There's a chance that the image of all Japanese cars will worsen in North America and elsewhere," Mitsushige Akino, chief fund manager at Akiyoshi Investment Management, told Auto News. "We just don't know. There are things we still can't predict."
Honda had to initiate a recall of its own last week, saying, due to a faulty window switch, it would recall some 646,000 of its Fit/Jazz and City models globally after a child died when fire broke out in a car last year.
"Toyota is the front-runner representing Japanese cars," Honda exec VP Koichi Kondo said at a news conference. "In that sense, we're somewhat worried that there may be a knock-on effect on other Japanese brands, but we'll need a little more time to gauge any impact."