Toyota to test all SUVs, suspends Lexus GX output

By Chang-Ran Kim and Kevin Krolicki

TOKYO (BestGrowthStock) – Toyota Motor (7203.T: ) said on Thursday it would conduct safety tests on all its sport utility models after a report claiming that a handling problem in a new version Lexus put drivers at risk of rollover accidents.

Toyota took the unusual step of stopping sales of the Lexus GX 460 after Consumer Reports magazine warned against buying the vehicle and called it a “safety risk” because of a potential handling problem in turns.

Production will be suspended for nine working days starting Friday in light of the sales halt, a spokeswoman said, declining to say how many units would be affected.

Toyota first moved to suspend Lexus GX sales in the United States earlier this week and then extended that sales halt to the Middle East and Russia, the other markets where it is sold.

The move focuses renewed attention on Toyota’s safety and quality at a time when the world’s largest automaker has been struggling to recapture lost sales momentum after a string of damaging global recalls.

Even though the Lexus GX has been a low-volume model for Toyota, its potential safety problem threatens a further erosion in the once market-leading reputation of Toyota’s luxury Lexus brand, one analyst said.

“Even though the vehicle’s volume is a relatively small part of (Toyota’s) sales, as Toyota’s quality issues are now affecting Lexus too, we think the cost to repair the dented brands is poised to rise,” said S&P equity analyst Efraim Levy.

The Lexus GX starts at $50,000 in the U.S. market and the high-margin on the premium vehicles developed using Toyota’s mass-market vehicle platforms and parts has been a key part of its past financial success.

The Lexus GX 460, which is based on the same platform as the better-known 4Runner, has sold 5,400 units in the United States and Canada in the four months since it has been on the market. Another 580 units have been sold in the Middle East and Russia.

Shares of Toyota lost less than 1 percent in Tokyo trading. The stock remains down 12 percent since late January when it announced the first in a series of massive recalls.


Toyota is now conducting a battery of tests on the stability control systems of all its SUVs, a Toyota spokeswoman said. Those tests will include models like the Sequoia and the Land Cruiser.

“The foremost reason for doing the extra tests is to put customers’ minds at ease,” spokeswoman Ririko Takeuchi said.

She added that Toyota had received no reports of the problems described by Consumer Reports from GX 460 drivers. Until and unless Toyota identifies a safety defect, it cannot evaluate whether a recall is needed, Takeuchi said.

“There is no way of recalling a car — voluntarily or otherwise — unless we find something wrong with the car, and we haven’t done that yet,” Takeuchi said. “It’s premature to talk about any recall steps at this point.”

Toyota’s move to suspend sales within a day of the Consumer Report warning marked something of a contrast to earlier this year when it resisted taking action following a series of complaints related to unintended acceleration.

The company eventually recalled more than 8 million vehicles worldwide — almost as many cars as it sold last year — and was penalized by U.S. safety regulators for not acting quickly enough once it identified a defect with its accelerator pedals.

Toyota has said its engineers were testing the Lexus GX to identify the risk cited by Consumer Reports, and has offered to provide a loaner vehicle for any concerned driver of the 2010 GX 460 model until a remedy was available.

The sales halt comes just as Toyota was gearing up to begin marketing the Lexus GX in China, now the world’s largest auto market. Toyota announced pricing for China in late January, a step automakers typically take just before a new model hits showrooms. A Toyota spokesman in China said there was no set timetable to launch the vehicle as the review of its safety systems continues.

The U.S. government has mandated that electronic stability control be standard on all vehicles by the 2012 model year. Electronic stability control is especially important on SUVs because taller vehicles are at greater danger for potentially lethal rollover crashes.

Consumer Reports, which is considered an influential voice on vehicle quality, has called electronic stability control

Consumer Reports, which is considered an influential voice on vehicle quality, has called electronic stability control the most important development in auto safety since the seatbelt.

The systems use computers linked to sensors to detect when a car starts to drift in turns and then apply more brake power or less engine power to keep the vehicle on track.


(Additional reporting by Yuko Inoue; Editing by Joseph Radford and Lincoln Feast)

Toyota to test all SUVs, suspends Lexus GX output