Toyota Recalls Prius and Corolla Models

Toyota recallToyota Motor Corp. on Wednesday announced two safety recalls for its flagship Prius hybrid and a separate agreement to pay $25.5 million to settle a shareholder lawsuit related to its sudden acceleration problems.

In one recall, the automaker said the steering intermediate extension shafts in 670,000 Prius cars sold in the U.S. need to be inspected and in some cases replaced. In the second recall, 350,000 of those hybrids also will have to have their electric water pumps replaced.

Toyota will recall an additional 2 million vehicles worldwide, including the Prius and the Corolla, to fix the same problems.

These actions follow another large recall by Toyota barely a month ago. In October, the Japanese automaker recalled 2.5 million vehicles nationally to fix a faulty power window switch that has been linked to at least nine injuries and several hundred reports of smoke and fire. In one instance reported to federal regulators, a passenger in a Camry was burned while trying to extinguish a fire caused by the switch.

The big recalls come as Toyota?s vehicle sales in the U.S. have been surging after being derailed last year. Sales were hurt by manufacturing disruptions and inventory shortages caused by the Japan earthquake. Massive recalls in 2010 for sudden acceleration problems and other safety defects also added to Toyota?s sales woes.

The gas-sipping Prius has become an important vehicle for Toyota, giving the company a reputation for producing green vehicles and quietly becoming one of the top sellers in the automaker?s lineup. Toyota is on track to sell more than 250,000 Prius hatchbacks and station wagons this year, which will make it one of the bestselling passenger cars in the U.S. So far this year, the Prius has been the bestselling car in California.

In the U.S., the recalls include 2004 through 2009 model year Prius hybrids.

The steering shaft problem results from a manufacturing error in which certain parts in the system did not have the required hardness and could deform. Additionally, in some cars the electric motor that drives the water pump circulating coolant through the hybrid components can shut off. In some cases, this can cause the hybrid system to stop while the vehicle is being driven.

There have been no crashes or injuries reported for these two conditions. But continuing recalls might prevent potential new customers from purchasing a Toyota and could diminish the loyalty of current owners, said George Cook, professor at the Simon School of Business at the University of Rochester.

?This recall may also cause some sales problems for the company as the Prius model has been a hot model for Toyota,? he said.

The settlement in the shareholder litigation would put to rest allegations that the company hurt the value of its stock by hiding defects and other safety problems, as well as by not acting swiftly to address vehicles that accelerated out of control.

Those problems came to light in late 2009 after a horrific San Diego County accident that killed a family of four in a Lexus. In the months following, Toyota recalled more than 10 million vehicles worldwide, faced multiple congressional investigations and eventually paid record fines of almost $50 million.

Plaintiffs in the class-action suit, led by the Maryland State Retirement and Pension System, had claimed damages in excess of $100 million. Toyota?s total market value fell by as much as $30 billion at the height of the crisis.

?We are pleased to be turning the page on this legacy legal issue, pending court approval, and believe this is a reasonable outcome,? Toyota spokesman Mike Michels said of the settlement, which was revealed in court documents filed Tuesday.

The first shareholder lawsuit prompted by the sudden acceleration claims was filed in early 2010, and since then the cases have been narrowed to holders of Toyota stock traded on the New York Stock Exchange. The claims were consolidated in U.S. District Court in Los Angeles. Judge Dale Fischer has yet to approve the settlement.

In settling this case, Toyota removes another legal obstacle from its path. Last year, Toyota settled a wrongful-death case with relatives of the family killed in San Diego for $10 million.

But the Japanese automaker still faces numerous ? and potentially far more costly ? lawsuits related to sudden acceleration and other alleged safety problems.

Among them are multi-plaintiff state and federal cases alleging personal injury and death due to Toyota vehicles, as well as cases brought by consumers who contend that the value of their vehicles was diminished because of safety defects.

Those cases are set for trial starting early next year.

Source: MCT Information Services