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Toyota Recalls Tacoma Trucks

Zacks Equity Research

Toyota Motor Corp. (TM) is recalling around 342,000 Tacoma midsize pickup trucks to fix faulty front seat belts. The recall would involve car models from 2004-2011. However, no accidents have been reported due to the problem.

We believe the growing numbers of recalls by Toyota can have a detrimental effect on its future business; and thereby affect its profits going forward.

Previously, in Jul 2013, Toyota recalled 185,000 units of some subcompact car models globally due to a problem with their electric power steering system. The recalled vehicles included Yaris (know as Vitz in Japan) and Verso-S (aka Lactis in Japan) subcompact models.

In April, Toyota and other Japanese automakers, Honda Motor Co. (HMC), Nissan Motor Co. (NSANY) and Mazda Motor Corp., had decided to recall 3.4 million vehicles globally for an identical problem related to fixing defective airbag system in their vehicles, supplied by Japanese auto parts maker Takata Corp.

Toyota has often been criticized due to its series of vehicle safety recalls over the past few years. In Sep 2009, the company made the largest-ever global recall of 3.8 million vehicles, triggered by a high-speed crash in California that killed 4 members of a family. Later on, a string of recalls led Toyota to face numerous personal injury and wrongful death lawsuits in federal courts.

Consequently, in Dec 2012, the U.S. Transportation Department fined the company with $17.35 million due to a late response regarding a defect in its vehicles to safety regulators as well as late recall of those vehicles. This was not the first time the company registered heavy fines. Toyota also suffered a fine of roughly $48 million in 2010, imposed by the U.S. government, due to late recall of millions of defective vehicles.

Fuji Heavy Industries Ltd. (FUJHY), which retains a Zacks Rank #1 (Strong Buy), is one of the stocks in the related sector that is worth considering for investment.

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