Toyota recall of 7.5 million autos may slow its rebound in U.S.

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Just as it was regaining market share in the U.S., Toyota has announced a massive recall that could crimp its comeback.

The Japanese automaker said Wednesday that it will recall 2.5 million vehicles nationally to fix a faulty power window switch that has been linked to at least nine injuries and several hundred reports of smoke and fire. In one instance reported to federal regulators, a passenger in a Camry was burned while trying to use a loose article of clothing to extinguish a fire caused by the switch.

The recall — including an additional 5 million globally for the same problem — comes as vehicle sales in the U.S. have been surging after being derailed last year. Sales were hurt by manufacturing disruptions and inventory shortages caused by the Japanese earthquake. Massive recalls in 2010 for sudden-acceleration problems and other safety defects also added to Toyota’s sales woes.

This latest recall comes four months after the National Highway Traffic Safety Administration opened a probe into the problem.

“Japanese manufacturers rarely recall products without a fight. It is an image and pride issue, and it has been like this for decades,” said Rebecca Lindland, an analyst with IHS Automotive. “They don’t want to admit that they have a systemic defect in their cars because it hurts their reliability image.”

Toyota had asked regulators if it could handle the problem through a “special service campaign.” Such an initiative falls short of a recall. Under that service campaign, Toyota would have replaced switches without charge but only when customers complained, said Brian Lyons, a spokesman for the automaker.

But under the recall, Toyota will have to inspect 7.5 million cars worldwide for damage to the switch. It will also lubricate the device with a special grease that has been tested for preventing the switch from sticking and potentially causing a fire.

Toyota paid record federal fines of nearly $50 million two years ago for failing to promptly inform regulators of defects in its vehicles and for delaying recalls.

Lindland said Wednesday’s recall is unlikely to damage Toyota’s image with its large cadre of loyal, repeat buyers but over time could influence consumers to shop other manufacturers.

Through the first nine months of this year, Toyota brand sales have risen 32% compared with a year earlier. Its market share has jumped to 14.4%, from 12.5% during the same period last year.

“While the number of recalled vehicles is staggering, it doesn’t have the panicked safety concerns like the acceleration issues in 2010,” said Jessica Caldwell, an analyst with auto information company “It doesn’t seem like it will deal a huge blow to the company’s U.S. market share. Right now, increased competition and China should pose greater threats for the company.”

Toyota has seen sales plunge in China because of a politically motivated boycott by consumers who are avoiding Japanese goods in connection with a territorial dispute over islands claimed by both Japan and China.

In reporting the latest recall, Toyota said the driver’s side power window switch on the affected vehicles may experience a sticky feel during operation. Depending on what grease was applied to the switch to reduce the stickiness and how it was applied — including when it was assembled at the factory — the switch could melt, smoke and start a fire.

Toyota plans to disassemble the switches, inspect them and apply a special fluorine grease that it says will solve the problem.

Owners of vehicles covered by this recall are to receive a notification letter via first-class mail starting in late October. The repair will take about an hour depending on the dealer’s work schedule.

The U.S. recall includes the 2007 to 2009 RAV4, Tundra, Camry and Camry Hybrid as well as the 2008 to 2009 Scion xD, Scion xA and Sequoia. It also includes the 2007 and 2008 Yaris, the 2008 Highlander and Highlander Hybrid, and the 2009 Corolla and Matrix.

Toyota isn’t the only automaker having trouble with window switches.

Last week Honda announced a recall to correct a faulty automatic window switch in 268,000 model-year 2002 to 2006 CR-V sport utility vehicles that can malfunction and start a fire.

In the CR-V recall, the automaker said rainwater or spilled liquids may enter an open driver’s window and drip onto the master power window switch. Over time, exposure to liquids can cause electrical resistance in the switch, making it overheat, melt and cause a fire. No crashes or injuries have been reported related to the problem, but Honda said it knows of four switch fires.

It was Honda’s third big recall of the week. Altogether, the automaker recalled 1.4 million Civics, CR-Vs, Accords and Pilots sold in the U.S. to fix a variety of safety issues.