Toyota says recalls will cost the company about $2 billion

The cost of a series of massive recalls by Toyota Motor Corp. will reach about $2 billion, including both expenses and lost sales, the Japanese automaker told investors Thursday.

The company expects that its quality issues, including a one week suspension of production and sales for eight of its most popular U.S. models, will result in the loss of 100,000 auto sales this year.

Toyota detailed its financial results and the cost of its recalls in a conference call early Thursday, prior to the announcement by U.S. transportation safety officials that they have opened an investigation into whether the 2010 Prius hybrid suffers from a momentary loss of braking capability when the car goes over a rough road surface or pothole. Japanese transportation officials are also looking at the problem.

Since last fall, Toyota has recalled 5.3 million vehicles in the U.S. because certain types of floor mats can entrap the gas pedal, causing unintended acceleration. It also has recalled another 2.3 million U.S. vehicles because of a defect that can cause the gas pedal to stick, also resulting in an unintended acceleration. About 1.7 million of the vehicles in the recalls need to have both problems fixed. Toyota dealers began making repairs to the gas pedals on customers' cars Wednesday.

In midday trading, Toyota shares fell $1.70, or 2.3%, to $71.71.

Despite its recall problems, Toyota posted an unexpectedly healthy profit at the end of 2009 and boosted its sales forecast for the year ending in March.

Toyota earned $1.7 billion in the last three months of 2009, it's third fiscal quarter, compared with a loss of $1.8 billion a year earlier, when the global recession caused car sales industrywide to plummet.

During a call with investors, Toyota executives only briefly touched upon the acceleration problems. Takuo Sasaki, Toyota's managing officer, said the company was anticipating that the problems will cause a drop in sales of only 100,000 vehicles in the coming months. Earlier this week, Toyota said the recalls and sales suspension had cost the company about 20,000 U.S. sales in January.

Nonetheless, the company upgraded its financial estimates for the financial year ending in March. When one analyst asked whether Toyota's estimates might be "conservative," Sasaki said he believed the problem was contained.

"Since the announcement of countermeasures, dealers have been making all-out efforts to fix the vehicles," Sasaki said. "That will result in the resumption of sales going forward."

In 2008, Toyota became the bestselling car company in the world, but the acceleration issues and recalls have threatened to tarnish the company's image.

Though the reporting period represented by the new earnings report ended in December, many of Toyota's most serious problems began in late January, when the company made a second recall and announced the halt in production. The concerns increased on Wednesday of this week, when the Japanese government ordered the company to investigate acceleration issues with the hybrid Prius model, which had been a standard-bearer for Toyota and so far had escaped most of the negative attention. Sasaki said the company's financial estimates did not factor into the problems with the Prius.

Toyota announced earlier this week that January sales were down 15.8% from a year ago. The drop in sales came as General Motors and Ford saw a jump in sales, a sign that car companies might be emerging from the recession.

Toyota has been criticized for the handling of the problems with its vehicles. In November, the company blamed the sudden-acceleration problems on floor mats. In the January recall, the company said the problem may lie instead with the gas pedal. This week, federal investigators in the United States have said they are looking into whether the acceleration problems might have been caused by the car's electronic throttle system. When an analyst asked about that investigation, Sasaki said there was no evidence that the electronic throttle was the problem.

"There have not been any facts that have confirmed that sudden acceleration is caused by the electrotonic throttle system," Sasaki said. "That's what I heard, and I simply cannot mention any more specifics."

nathaniel.popper@latimes.com

jerry.hirsch@latimes.com

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