Toyota's profit outlook cloudy as it denies cover-up on Prius brakes

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TOKYO, Feb. 4 Kyodo -
Even as Toyota Motor Corp. on Thursday reversed its annual loss forecast and
projected a return to profitability in the current fiscal year, its outlook
remained clouded as the carmaker scrambled to deny a cover-up on brake troubles
involving its best-selling Prius hybrid.
Both the Japanese and the U.S. governments are expected to launch an
investigation on the issue following more than 100 complaints combined in the
two countries over temporary malfunctioning of Prius brakes on bumpy and
slippery roads, including frozen surfaces.
The recent finding of problems over its new Prius model, which debuted in May
and remains the top-seller in January, dealt a fresh blow to Toyota amid a
flood of criticism over its response to massive global recalls involving floor
mats and accelerator pedals.
''We were trying to investigate the cause so we were not covering up the
claims,'' Hiroyuki Yokoyama, managing officer for quality and customer service,
told reporters in the first official briefing on the Prius complaints.
''We are currently studying some form of measure to notify our customers
(already using the Prius hybrid),'' he said, without denying the possibility of
a future recall. ''We hope to reach a conclusion as early as possible.''
Yokoyama said the automaker began receiving information on the brake problems
from its dealers from last fall and the number of claims began to increase from
December. It dealt with individual complaints by exchanging parts.
The company then redesigned the software for the anti-lock brake system, which
electronically prevents vehicles from slipping, for newly produced models in
January, but did not make the complaints public.
Although the automaker has not received any complaints on other gas-electric
hybrids, it is also checking the luxury Lexus HS250h hybrid sedan and
hybrid-only compact sedan, the Sai, as both of them employ the same brake
system as the Prius.
The Japanese transport ministry plans to examine if there were any problems
with Toyota's response to the complaints, while the U.S. government may ask the
Japanese auto giant to recall the hybrid if the problem and solution are
identified.
''Since this could affect people's lives, special care needs to be given when
measures are taken,'' Chief Cabinet Secretary Hirofumi Hirano said at a news
conference.
''I hope (Toyota) will respond quickly to remove criticism'' from abroad, he
added.
Before the Prius briefing, Toyota revised upward its earnings outlook for
fiscal 2009 through March for the third time on the back of brisk sales of
hybrids and its cost-cutting efforts.
It now anticipates a group net profit of 80 billion yen, from an earlier
projected loss of 200 billion yen and in a reversal from the 437 billion yen
loss it logged the previous year.
Toyota Senior Managing Director Takahiko Ijichi said the current full-year
forecasts take into account the anticipated costs from recalls over faulty gas
pedals and floor mats, but do not figure in costs that may arise from the
latest Prius troubles.
Ijichi also disclosed that the automaker currently expects up to 180 billion
yen in financial impact for fiscal 2009 from the recalls involving the floor
mats and faulty gas pedals. Global sales centering on Europe and North America
are also expected to fall by around 100,000 units due to the recalls.
Problems over Prius brakes came to light following a safety recall of some 5.55
million vehicles in the United States and Canada over sudden acceleration
problems caused by loose floor mats, which first emerged last September.
A more recent recall in January over faulty accelerator pedals, involving the
popular Camry and Corolla models, has quickly spilled over from North America
to Europe, China, Latin America and other parts of the world.
Analysts warn the damage to Toyota's reputation and sales will be far bigger if
the safety crisis hits its hybrids because the automaker has been a pioneer in
developing the green technology.
''Even when everything else was bad, hybrids held up,'' said Tatsuya Mizuno, a
former auto analyst at Fitch Ratings in Tokyo and current representative of
consulting firm Mizuno Credit Advisory.
''With the last stronghold facing a setback, it's turning into a situation
where the view on Toyota's brand strength itself may alter,'' he said.
Mizuno added that Toyota may have faced pressure to push through aggressive
cost-cutting with its recovery in earnings slower than rivals such as Honda
Motor Co. and Nissan Motor Co.
But Toyota's Ijichi emphasized that quality and cost reduction are ''not in
conflict,'' adding, ''We're going to continue offering quality products to our
customers at lower prices.''
==Kyodo