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Toyota's Problems Probably Not Over, Which Is Good for Ford, Says Jeff Matthews

Posted Feb 04, 2010 12:11pm EST by Peter Gorenstein
Related: tm, f, hmc, MTLQQ.PK, spy, ^n225, spy

Toyota's crisis appears far from over.  The company now says it may recall the latest version of the Prius, after the Japanese government ordered an investigation of its braking system.  The U.S. Department of Transportation is also investigating the situation. 

This, of course, is comes after Toyota had to recall almost 8 million vehicles worldwide for defects leading to sudden acceleration. 

Meanwhile, the company today raised its annual forecast for global vehicle sales and raised its earnings guidance despite estimating the recall will cost it $2 billion.  That good news should not tempt investors to buy the stock, says Wall Street Journal columnist James Stewart.  In fact, Stewart recommends shareholders sell because "floor-mat and gas-pedal nightmares are likely just beginning." 

Jeff Matthews who runs the hedge fund Ram Partners agrees. "Typically, the first problem is never the last," he notes. 

Furthermore, as a longtime Ford shareholder, Mathews says "it takes a long time to turn around a huge organization."  He predicts a bumpy road for the Japanese car-maker, which should benefit competitors. "The real problem for Toyota is it comes at a time Ford’s quality is in reality and in perception, has moved significantly higher," he says, showering praise on Ford CEO Alan Mulally.

Disclosure: Matthews says he has not added to his Ford position as a result of the Toyota crisis.

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