Toyota Motor (TM) reported it swung to a profit in its fiscal third quarter Thursday, but will likely spend the day and weeks to come explaining how it intends to repair the antilock braking system on thousands of newly redesigned Prius models that came on the market in May. The world's largest automaker admitted the latest problem as it reported a profit of 153.8 billion yen ($1.68 billion) profit in its fiscal third quarter.Toyota took steps last month to modify the brake-system design last month after it learned of complaints from drivers about insufficient braking when driving over bumpy or frozen roads, the Associated Press reported. Regulatory officials in Japan and the U.S. are looking into some 180 complaints from consumers about the problem. The latest matter comes as Toyota is amid two massive recalls of millions of its most popular cars to address unintended acceleration.
"We are investigating whether there are defects in the Prius," Toyota executive Hiroyuki Yokoyama told reporters at Toyota's Tokyo headquarters, according to AP.
Less Than Forthcoming
As with the most recent recall involving sticky accelerators on models sold in the U.S., Europe and China, company officials remained tight-lipped about the latest case. That's sure to add to the rising chorus of criticism that Toyota has been less than forthcoming about problems with its cars, putting its customers at risk for injury or worse.
The Prius' braking problem hits at Toyota's flagship brand, Barclays Capital analyst Brian Johnson told The New York Times. "Prius is the gold standard," said Johnson, who along with two family members owns three Prius vehicles. "We know Toyota puts its best engineering and its best talent into that car."
Toyota's quarterly profit, earned in the 12 weeks ending Dec. 31, came before the company began its most public recall of 2.3 million cars in the U.S. for "sticky" accelerators. Earnings exceeded analyst expectations of 87.7 billion yen, according to a consensus estimate compiled by Thomson Reuters. The result reversed a 164.64 billion yen loss in the year-ago quarter. Toyota attributed the gain to cost-cutting and sales recoveries in North American and Asia, The Wall Street Journal reported.
Momentum Could Falter
Toyota said third-quarter net revenue rose 10.2% to 5.3 trillion yen, and raised full-year revenue forecasts to 18.5 trillion yen. The company also lifted its vehicle sales forecast for the fiscal year ending March 31 to 7.18 million units, up 150,000 units from November's forecast.
But Toyota said its sales momentum could falter as consumers begin to question the quality of its products. That could be a fairly larger understatement, given the 16% sales falloff already registered for January. Eying that opportunity, General Motors and Ford Motor (F) have begun offering current Toyota owners $1,000 rebates to trade in their vehicles for new ones.
In trading on Tokyo stock markets Thursday, Toyota shares fell more than 3%. In the U.S., shares ended Wednesday trading off 6%, after news of the Prius braking problems surfaced and Transportation Secretary Ray LaHood bungled comments about the ongoing recall of models with sticky accelerators, saying at first owners should "stop driving" them.
LaHood quickly took back the words, saying he misspoke. LaHood instead advised owners to bring their vehicles to dealers if they were concerned. "What I meant to say or what I thought I said was, if you own one of these cars or if you're in doubt, take it to the dealer, and they're going to fix it," he said.
Toyota also announced Wednesday it was providing payments of up to $75,000 to dealers to help cover costs associated with accommodating consumers during the recall. The sums reimburse retailers for extended hours, car washes, free oil changes and other services aimed at keeping customers happy.
Introduction to Economic Indicators
Measure the performance of the economy.View Course »