UPDATE 4-Toyota suspends U.S. sales of 8 models in recall

* Toyota also halts some production in North America

* Shares end down 4.3 pct, biggest fall in eight months

* Earnings may be affected if sales suspension long
-analyst

* Action is necessary until remedy is finalised – Toyota

* Toyota mulling if recall in Europe also needed
(Adds background and analyst comment)

By Nobuhiro Kubo and Bernie Woodall

TOKYO/DETROIT, Jan 27 (BestGrowthStock) – Toyota Motor Corp
(7203.T: ) will suspend U.S. sales of eight models subject to a
massive safety recall, an unprecendented move that sent its
shares tumbling and raised questions about the timing of its
earnings recovery.

Toyota said it would also halt production of the models,
including the best-selling Camry, at plants in the United
States and Canada in the first week of February.

Shares in the world’s biggest automaker suffered their
biggest slide in eight months, falling 4.3 percent in a Toyko
market (.N225: ) down 0.7 percent on Wednesday.

Last week, Toyota announced it would recall 2.3 million
vehicles in the United States to fix potentially faulty
accelerator pedals, its second large recall in four months in
the United States, its biggest market.

The series of recalls threaten to damage Toyota’s
reputation for safety and quality that helped it ascend to the
top of the global auto industry. [ID:nN2196901]

“This unprecedented automotive decision indicates how
serious a safety problem this is,” said Michelle Krebs, senior
analyst at Edmunds.com. “We’ve gone from floormats to recalls
for wear items to a full shutdown, and I can’t help but think
that the company’s credibility is being called into question.”

Toyota said the production halt would initially last a week
before being reviewed. Officials could not recall a sales or
production suspension resulting from vehicle defects on such a
scale.

Toyota is considering whether it needs to issue a recall in
Europe as well, where the same parts are used for some models.

EARNINGS THREAT

The sales and production suspension could also affect its
earnings in the near term.

“The recall itself won’t be a big problem for Toyota’s
earnings, but suspending production and sales could have a big
impact depending on how long it lasts,” said Koji Endo, an auto
analyst at Advanced Research Japan.

Battered by a plunge in global sales brought on by the
financial crisis, Toyota has forecast a 350 billion yen ($3.9
billion) operating loss for the year to March — a projection
widely regarded as conservative.

It was expected to post a operating loss of around 47
billion yen in the year to March 2010, before rebounding to a
599 billion yen profit in 2011, according to 19 analysts polled
by Thomson Reuters I/B/E/S.

“There is a chance that Toyota could swing to profit this
business year, but this sales and production suspension may
have a certain impact,” Endo said.

Toyota said this week it expects a 6 percent rise in
group-wide global sales to 8.27 million units in 2010, but
according to a company spokesman in Tokyo, the outlook does not
take this sales suspension into account. [ID:nTOE60P0AA]

The sales suspension and recall includes Toyota’s
top-selling vehicle in North America, the Camry, for model
years since 2007.

Also included are the 2009-2010 model year RAV4, Corolla
and Matrix, the 2008-2010 model year Sequoia, the 2007-2010
model year Tundra, the 2005-2010 model year Avalon and the 2010
model year Highlander.

19,000 CARS A WEEK

Annual combined sales of these models are 1 million cars in
North America, more than half of Toyota’s annual sales there
last year, according to Advanced Research’s Endo. It is more
than 2,700 units a day or 19,000 cars a week.

“In this highly competitive market, no automaker — not
even Toyota — can afford to stop selling its cars and trucks
for long, but perhaps Toyota is banking on the idea that
customers will appreciate the priority of their safety in this
decision,” commented Edmunds.com Senior Analyst Jessica
Caldwell.

Bob Carter, Toyota U.S. group vice president, said the
world’s No.1 automaker is taking the actions to ensure safety
and restore confidence in Toyota among consumers.

“This action is necessary until a remedy is finalised,”
Carter said in a statement. “We’re making every effort to
address this situation for our customers as quickly as
possible.”

The plants where the models are made are located in
Indiana, Texas, Kentucky, and in Ontario.
($1=89.22 Yen)

Investing

(Editing by Matthew Lewis and Lincoln Feast)

UPDATE 4-Toyota suspends U.S. sales of 8 models in recall