Toyota Motor Shares Up Despite 'Expanded Airbag-related Recall'

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By Athena Yenko | June 12, 2014 6:14 PM EST

Toyota Motor Corp. (TM) shares are up by 0.3 percent in early market trading, The Street reported.

"We rate Toyota Motor Corp. a buy. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, attractive valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins," TheStreet Ratings team said.

The rose in shares occurred despite the company's announcement of expanded airbag-related recall across countries amounting to $2.27 million.

Toyota Motor Corp is recalling about 650,000 vehicles in Japan because of potentially defective airbags, expanding a costly recall it announced in 2013 because the supplier, Takata Corp, had not fully identified the problematic parts, the carmaker said on June 11, 2014.
Toyota Motor Corp is recalling about 650,000 vehicles in Japan because of potentially defective airbags, expanding a costly recall it announced in 2013 because the supplier, Takata Corp, had not fully identified the problematic parts, the carmaker said on June 11, 2014.

Toyota is recalling a total of 19,600 cars in Australia and 650,000 cars in Japan due to airbag systems with defects involving fire risk.

The recall covered Toyota's 20 car models, including Corolla sedan and Yaris subcompact, ABC reported.

"There is a risk that the airbag container could break down and scatter around, which could cause fire or injuries," Toyota Motor said in a statement given to Japan's transport ministry.

A passenger in Japan who reported about his passenger seat burnt up due to the airbag defect sparked Toyota's worldwide recall, according to a company spokesman. Fortunately, there are no grave injuries and fatal accidents that had been reported.

In April, TM had already recalled a total of 6.38 million cars worldwide due to numerous defects. The company is now in a difficult place protecting its brand against bad reputation.

In May, the company retained its position as the market leader in terms of worldwide sales volume for selling 9.98 million vehicles in 2013 up by 2 percent from its total sales in 2012, NASDAQ reports.

But TM also topped the list with the most number of vehicles recalled both in 2012 and 2013. The company had a record of 5.3 million cars recalled both in 2012 and 2013.

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(Photo: reuters / HEINZ-PETER BADER)
Toyota Motor Corp is recalling about 650,000 vehicles in Japan because of potentially defective airbags, expanding a costly recall it announced in 2013 because the supplier, Takata Corp, had not fully identified the problematic parts, the carmaker said on June 11, 2014.
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