China—The crisis facing Toyota Company Corp. deepened Thursday as the company said its large-scale recall, stemming from a faulty accelerator pedal problem, would spread to Europe and China.
The geographic reach and size of Toyota's recall has grown dramatically in recent days, raising questions about how many of its vehicles around the world are equipped with the defective accelerator pedal.
Tannen Maury/European Pressphoto Agency
A Toyota dealership in Park Ridge, Ill.
The Japanese auto maker said it will recall an unknown number of vehicles in Europe. But unlike the U.S. market, where production will be halted for at least a week, different parts are already being used in new vehicles in Europe and production will continue as normal, the embattled car maker said.
In China, one of Toyota's joint ventures will recall 75,552 RAV4 sport-utility vehicles, the country's quality watchdog said.
"Toyota is making every effort to address this situation for our customers as quickly as possible," the auto maker said in a statement.
In the U.S., Toyota announced it was expanding a recall announced late last year involving pedals catching on floor mats. That recall originally affected 4.3 million Toyota and Lexus vehicles, making it the company`s biggest recall ever. Toyota added 1.1 million more vehicles to that recall on Wednesday, representing four models.
The move came as Fitch Ratings, the credit-ratings agency, placed Toyota's A-plus debt rating—two notches below a perfect triple-A rating—on a "negative" ratings watch.
The recent recalls and sales suspension casts "a negative light on Toyota's reputation for quality," said Jeong Min Pak, senior director in Fitch's Asia-Pacific Corporates team. "This could hamper the company's potential sales and profitability recovery, especially in the U.S. market."
Standard & Poor's and Moody's, rival ratings agencies which have Toyota rated at double-A and AA1 respectively, said they had no immediate plans to either downgrade Toyota's debt rating or put it under a ratings watch.
But S&P added in a statement that "the suspension may put downward pressure on Toyota`s earnings, which we believe have entered a recovery phase." Investors seemed to conclude the same. The auto maker's stock price continued to slide Thursday, falling 3.9% in trading on the Tokyo Stock Exchange. The company's shares have fallen 15% over the past five trading days, since news of the latest recalls began to spread.
The markets appear to see Toyota's pain as opportunity for rivals' gain. Nissan Motor Co. and Honda Motor Co.'s shares both closed up nearly 3% on Thursday, outperforming the broader Nikkei 225 benchmark average.
Even so, Toyota's two biggest Japanese rivals firmly ruled out offering incentives to take advantage of their peer's woes, as they hope to gain sales without calling attention to what could be seen as a broader slip in Japanese quality.
"We will not undertake any sales activities that expressly target Toyota customers in the U.S.," a Honda spokeswoman said. A Nissan spokesman also said the company wouldn't embark on any specific sales of marketing activities, despite the recall crisis facing Toyota.
That is a contrast with Ford Motor Co. and General Motor Co., both of which have launched new incentives to snatch some market share back from the world's biggest car maker. Ford said it would offer new customers $1,000 cash to trade-in used or leased vehicles from Toyota, while GM detailed a similar program earlier Wednesday.
"Toyota is the standard-bearer for Japanese autos. If you are Honda and Nissan, it doesn't help to play it up because people would ask, 'Do all Japanese cars have problems?'" said Chris Richter, autos analyst at CLSA Asia Pacific Markets. "U.S. makers have faced decades of share erosion because of Japanese cars—now they have a chance to say, 'Japanese cars aren't as good, so buy America.'"
Meanwhile, the recalls slamming Toyota in the U.S. and Europe don't appear likely to spread to its home market. The Japanese transportation ministry isn't yet considering a probe related to Toyota's massive recall in the U.S.
The ministry believes that the parts that have caused problems in the U.S. are made locally and aren't used in Toyota cars sold in Japan, said an official there, who asked not to be identified. "It is our view that there is no need for a specific action at this point," the official added.
—Yuka Hayashi contributed to this article.
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