Toyota image seen at further risk in Corolla probe

TOKYO Thu Feb 18, 2010 2:40pm IST

The Bank of Japan building is reflected on Toyota Motor Corp's Prius hybrid car in Tokyo February 18, 2010. REUTERS/Toru Hanai

The Bank of Japan building is reflected on Toyota Motor Corp's Prius hybrid car in Tokyo February 18, 2010.

Credit: Reuters/Toru Hanai

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TOKYO (Reuters) - A second recall of Toyota Motor Corp's flagship Corolla model in the United States, this time potentially to address complaints about the steering, would cost very little on paper but risks further damaging its brand.

U.S. regulators launched a preliminary probe on Wednesday into reported steering problems with the Corolla, Toyota's second-most popular vehicle in the important U.S. market behind the Camry sedan.

Preliminary investigations are a common step by regulators and are often closed without leading to a recall.

Toyota said it was looking into complaints about the steering systems of the 2009 and 2010 Corolla models, of which some 550,000 have been sold in North America, but that it would only recall the car if the issue were deemed a safety risk.

But analysts and investors are worried about the damage renewed scrutiny on the Corolla, which is already subject to a recall for an accelerator pedal defect announced less than a month ago, could do to Toyota's brand and sales.

"Another recall of the Corolla may cost only 5 billion yen to 6 billion yen ($55 million to $66 million). But the Corolla is synonymous with the Toyota name," said Koji Endo, an auto analyst at Advanced Research Japan.

"Recalling the flagship model over and over again could damage Toyota's brand. I am afraid its customers might leave for rival cars."

Toyota's quality chief, Shinichi Sasaki, said at a briefing in Tokyo on Wednesday that internal studies have shown that drivers have complained about a change in steering response versus older Corollas, possibly due to a switch from a hydraulic power steering system to an electronic one.

He also said that it was not yet clear if the problem is due to the steering, tyres or another part.

Toyota recalled 2.3 million vehicles, including the 2009 and 2010 Corolla models, in the U.S. to fix faulty accelerator pedals in late January. It has repaired about 500,000 cars so far, a Tokyo-based Toyota spokesman said.

So far the problem appears contained to the United States. Japan's transport ministry said there have been no complaints reported about the Corolla's steering system in Japan, adding that the model sold in Japan used different parts.

Shares of Toyota closed down 0.6 percent at 3,360 yen, underperforming the Nikkei average's 0.3 percent rise.

(Editing by Chris Gallagher)

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