Toyota February Recall Is Unlikely to Derail Carmaker's U.S. Sales Rebound

Toyota Motor Corp.’s February U.S. sales gain may be its second-biggest since last year’s record recalls, even after the world’s largest carmaker said it will have to fix more flawed vehicles.

The automaker may report a 27 percent increase in deliveries of Toyota, Lexus and Scion cars and light trucks for the month, based on the average of four analyst estimates compiled by Bloomberg. At most, the recall of 2.2 million vehicles last week may cost Toyota “a couple thousand units” of sales in February, said Jessica Caldwell, an analyst at industry researcher Edmunds.com in Santa Monica, California.

Toyota has spent 15 months reassuring consumers about quality after calling back more than 10 million vehicles for defects related to unintended acceleration. Along with assessing complaints faster, the carmaker added two years of no-cost maintenance as standard on new U.S. models and raised incentives to draw buyers.

Following the company’s sales suspension in late January and early February 2010, “this February was easy,” said Caldwell. “It still looks like they’ll be up 28 or 29 percent. And we’re conservative with Toyota.”

Toyota rose 0.8 percent to 3,850 yen at 10:30 a.m. in Tokyo Stock Exchange trading. The shares have gained 20 percent this year.

2010 Decline

Toyota’s U.S. sales fell 0.4 percent in 2010, making it the only major automaker to post a full-year decline.

To boost sales, the company is offering no-interest financing for 60 months on Camry sedans and $500 in down-payment assistance to all customers, Bob Carter, Toyota’s U.S. group vice president of sales, said last month.

Toyota is also offering an extra $500 to current Camry buyers who buy a new model, he said.

On most models, including Corolla compacts, Prius hybrids, RAV4 crossovers and Tundra pickup trucks, Toyota is offering discounted leases and loan interest rates of between 0 percent and 2.9 percent in February, according to its website.

“Their incentives were up from January, but not as much as we expected,” Caldwell said. Toyota spent an average of $2,041 per vehicle in February, compared with $1,942 in January, according to Edmunds.com.

That’s below the industry average of $2,558 for the month, Caldwell said.

Rising Confidence

Toyota and other automakers will release February sales results today. Industrywide deliveries are likely to rise 19 percent from a year earlier, the average of five analyst estimates compiled by Bloomberg, as rising consumer confidence spurs buying.

Confidence among U.S. consumers increased in February to the highest in three years, according to separate reports from the Conference Board and Thomson Reuters/University of Michigan last week. The percentage of consumers planning to buy a new vehicle within six months increased to 4.6 percent from 3.1 percent at the end of last year, the New York-based Conference Board said.

U.S. sales for the Toyota City, Japan-based company fell 8.7 percent in February 2010, pulled down by a sales suspension affecting models including the Camry, Corolla and RAV4.

February will be good for overall U.S. auto sales, owing to poor weather that curtailed some sales a year ago, Rod Lache, an auto analyst for Deutsche Bank AG, said in a Feb. 24 report. Toyota will further benefit because it only began to lift its sales stoppage on Feb. 5, 2010, he said.

The Japanese automaker’s monthly U.S. sales rose 41 percent in March 2010, its best monthly gain for the year.

‘Things Have Changed’

Toyota also benefited from the National Highway Traffic Safety Administration’s report that found mechanical flaws, rather than electronic defects, were the only likely cause of unintended acceleration in Toyota vehicles.

“Things have changed” at Toyota, U.S. Transportation Secretary Ray LaHood told Bloomberg in an interview last month. The company is investing more in safety, he said. “They get it, and I think Toyotas are safe to drive.”

Toyota’s Feb. 25 recall included 1.38 million vehicles being added to its November 2009 recall to fix floor mats that could shift out of position. The company also said it would recall 769,000 Highlander and Lexus RX sport-utility vehicles to fix driver’s side floor-carpet covers and retention clips.

Last week’s recall was “unexpected, but it is more of the same,” said John Humphrey, senior vice president of automotive operations at J.D. Power and Associates in Troy, Michigan. “Last year, there were more unknowns about the causes of unintended acceleration.”

The following table shows estimates for combined Toyota, Lexus and Scion brand sales in the U.S. in February and the overall industry, compared with the year-earlier level.

                              Toyota     Industry
Brian Johnson                  30.0%       20.0%
(Barclays Capital)
Rod Lache                      20.0%       19.6%
(Deutsche Bank)
Jessica Caldwell               28.8%       20.1%
(Edmunds.com)
Jesse Toprak                   27.7%       18.6%
(TrueCar.com)
Jeff Schuster                   NA         17.0%
(J.D. Power)
Average                        26.6%       19.1%

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

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