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Sales shutdown rocks Toyota, recall broadens

autos Updated: Jan 28, 2010 15:26 IST

Reuters
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Toyota Motor Corp shut down sales of its best-selling vehicles on Wednesday under pressure from the Obama administration to address a product safety crisis that threatens its image in its largest market.

Shares of Toyota fell another 2 percent in Tokyo trading as concern deepened about the knock-on effects from a recall to fix millions of vehicles.

Toyota said late on Wednesday that it had determined that it would have to fix another 1.1 million vehicles to address the risk that floor mats could trap accelerator pedals and cause bursts of sudden acceleration.

Separately, Toyota said it believed it had found a mechanical fix for a problem that has forced it to recall 2.3 million vehicles for sticky accelerators.

Taken together, Toyota now has recalled nearly 6 million vehicles for problems with the accelerators used across its lineup, a sweeping safety action that has tarnished its reputation for quality and emboldened its rivals.

"Toyota's got the resources to bounce back from this, but this is the biggest crisis that they have ever faced, and Ford and Hyundai and others are coming on strong," said Jim Ziegler, an auto dealer consultant in Atlanta.

U.S. Transportation Secretary Ray LaHood said in an interview with Chicago's WGN Radio that regulators had asked Toyota to take the unprecedented step of halting production of affected vehicles as it worked to address the problem.

In a move that underscored the depth of the crisis, major car rental agencies including Enterprise Holdings, Avis Budget Group Inc and Hertz said they were pulling Toyota vehicles from their rental fleets.

Looking to gain from Toyota's slip, General Motors Co said it was offering Toyota customers payouts of up to $1,000 or zero-percent financing for up to five years on most of the GM line-up.

U.S. Representative Bart Stupak, a Michigan Democrat and chairman of the House Energy and Commerce subcommittee on investigations, said the panel would continue to monitor the Toyota situation and "press for answers."

"I am very concerned about the safety issues," he said in a statement. "Members of Congress and consumers need to know exactly what the problem is, how to fix the problem and what must be done to protect drivers of Toyota vehicles."

Toyota executives, meanwhile, huddled with U.S. dealers in a series of hastily arranged conference calls on Wednesday.

One of the key issues: how to deal with thousands of Toyota cars now stranded on dealer lots that are banned from being sold because of the faulty accelerator pedals.

Dealers in contact with Toyota said the automaker had provided assurance that it would help them address the financial fallout from the recall and increase sales incentives to win back lost business in the weeks ahead.

Toyota spokeswoman Celeste Migliore said the automaker was in the process of reviewing its incentives and "all of our advertising" in response to events.

CTS Corp, which supplies the accelerator pedals at the center of the crisis, said late on Wednesday it had a fix for the safety issue and had begun to ship redesigned parts to Toyota factories.

Shares of CTS fell as as much as 20 percent on Wednesday, before closing down just 2.4 percent.