WRAPUP 2-US Congress probes Toyota recalls as impact spreads

For more on Toyota’s safety recall, click [ID:nN27231388]

* U.S. Congress seeks information from Toyota on recalls

* Toyota reviewing fix for flawed gas pedals with regulator

* Shares shed further 2 pct, down 17.6 pct since last week

* Suppliers seen at risk of fallout
(Adds comments from suppliers, analysts)

By John Crawley and Nobuhiro Kubo

WASHINGTON/TOKYO, Jan 29 (BestGrowthStock) – Toyota Motor Corp
(7203.T: ) faced scrutiny from Congress over its biggest ever
safety recall as investors, suppliers and consumers weighed the
impact of an unprecedented halt in U.S. production by the No.1
automaker.

Toyota’s recalls due to problems with unintended and
dangerous acceleration comes at bad time for the industry as it
struggles to lure buyers back to showrooms after a sales slump
that helped drag U.S. rivals General Motors [GM.UL] and
Chrysler into bankruptcy.

House Energy and Commerce Committee Chairman Henry Waxman
said he would hold a hearing next month to consider “how
quickly and effectively” the car maker responded to complaints
about sticking pedals and slipping floormats.

“Like many consumers, I am concerned by the seriousness and
scope of Toyota’s recent recall announcements,” Waxman said in
a statement. [ID:nN28126963]

The unusual action by the U.S. government comes just hours
after the Toyota recall for accelerator problems was widened to
include China and Europe. [ID:nSGE60R06P]

Toyota this week suspended North American sales and
production of eight models including its best-selling Camry
after pressure from regulators.

Japan’s largest company, studied for its devotion to
quality, could recall about 8 million vehicles in North
America, Europe and China — more than the number of cars and
trucks it sold worldwide in 2009.

In Tokyo, some worried about the knock-on effects to
Japan’s image and economy.

“If Toyota has hard times, there’s a high probability that
also Japan will,” said Takeo Namekata, a 62-year-old office
worker. “Particularly, trade will suffer.”

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For Reuters Insider financial television, click

http://link.reuters.com/muv56h

For a Graphic, click:

http://graphics.thomsonreuters.com/RNGS/2010/JAN/TOYOTA.jpg
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REPUTATION SULLIED

Suppliers were expected to see some fallout.

“Toyota has a very close tie with its hand-picked
suppliers. It’s like a parent in a big family and the children
actually depends on Toyota for a living,” said Kevin Chen,
president of Gasgoo.com, a major Chinese B2B auto parts trading
platform.

“If Toyota gets the flu, its suppliers will also be
sneezing.”

International supply companies were most at risk, said
Tatsuya Mizuno, President of Mizuno Credit Advisory.

“Of course, there will be negative implications. But if the
company recognizes that this problem was caused because of
international parts-suppliers, then it’s conceivable that they
could switch to Japanese parts-suppliers,” he told financial
television service, Reuters Insider.

India’s Amtek Auto (AMTK.BO: ), which supplies some parts to
Toyota in the United States, did not expect a major impact from
the shutdown there.

“Our exposure to the U.S. has already come down by 50 to 60
percent in the last one year due to the slowdown and
recession,” said Finance Director Santosh Singhi. “Toyota
recalls have been happening over a period of time so we have
been prepared for shut-downs.”

Analysts have estimated the sales halt could cost Toyota at
least 50 billion yen ($556 million) in operating profit a
month, almost as much as it made in the September quarter.

The impact will also depend on whether Toyota’s famously
loyal customers begin to abandon the brand, an issue hotly
debated on blogs and online forums.

“I know in the next year or so, I am going to have to look
at buying another car, and I am likely to buy used,” said one
reader of The Consumerist calling themselves theblackdog. “I
don’t think I could trust buying a used Toyota that was
manufactured in 2005 or later, so I guess I will be scratching
Toyota off of my list to look at.”

Others, however, applauded Toyota’s response.

“Although Toyota’s reputation has been sullied since the
recalls started taking place, the company is sending a message
that it cares more about safety than income,” wrote DREA on
Business Pundit. “I bet that in the long run, this move will
have been worth the risk.”

Shares of Toyota have dropped 17.6 percent since Jan. 21,
when it announced it was broadening its recalls by a further
2.3 million vehicles. The stock ended down 2 percent in Tokyo
on Friday.

RECKONING THE DAMAGE

Industry analysts and executives estimate that it will cost
some $250 million in warranty costs alone to address the
smaller of the two recalls underway in the United States.

The automaker also faces the fallout from the larger recall
that began last year and was broadened this week for vehicles
at risk of having floormats that can become jammed under
accelerator pedals.

Then there are the still unknown costs for lost production,
financial support to dealers and sales incentives the company
has told its retailers it is considering in a bid to keep
customers being wooed by rivals.

In addition, Toyota is certain to face lawsuits from people
who claim injuries from the defects or class-action claims on
behalf of consumers who will claim the crisis has damaged the
value of their cars, analysts say.

MONTHS OF WORK AHEAD

In consultations with its dealers on Thursday, Toyota said
it would take months to complete repairs on the recalled
vehicles since it would send notices to affected customers in
batches of ten thousand to avoid overrunning repair shops.

CTS Corp (CTS.N: ) the manufacturer of the accelerator pedals
that led to the sales half said on Thursday that it has
completed work on a redesigned accelerator pedal and was
rushing that fixed part into production for Toyota.

Cars sold in Toyota’s home market of Japan use accelerators
supplied by Denso Corp (6902.T: ). Denso said it was still
reviewing the situation and declined further comment.
($1=89.95 Yen)

Stock Market

(Additional reporting by Bernie Woodall, Soyoung Kim, Kevin
Krolicki in DETRIOT; Chang-Ran Kim and Taiga Uranaka in TOKYO,
Janaki Krishan in MUMBAI and Fang Yan in SHANGHAI; Editing by
Lincoln Feast)

WRAPUP 2-US Congress probes Toyota recalls as impact spreads