Honda sets own recall as Toyota details action

A salesman walks amid the Toyota vehicles on the lot, including Toyota Camrys (front), at Boch Toyota in Norwood, Massachusetts January 27, 2010.

TOKYO/PARIS (Reuters) - Toyota said its global safety withdrawal would take up to 1.8 million vehicles off Europe's roads and rival Honda announced its own recall, placing the vaunted pedigree of Japan's carmakers under fresh scrutiny.

The move by Honda, tipped to benefit from Toyota's woes, came as suppliers, consumers and analysts weighed the financial impact on Toyota of its recall and its suspension of U.S. sales.

Investors also assessed the fall-out for an industry just emerging from global crisis as well as the damage to Japanese automakers' prized reputation for safety and reliability.

"It's not that their vehicles are worse than the others, (the recalls are) just showing maybe that their vehicles are like the others," said IHS Global Insight analyst Carlos Da Silva.

"The race to cost cuts and the competition between all brands is so fierce that even the mighty Japanese are doing things that are not as reliable as they were."

In a rare piece of positive news for Toyota, a source told Reuters that its U.S. sales could resume by the third week in February if a remedy to potentially sticking accelerator pedals was rolled out smoothly.

BENEFITS

Barclays Capital analysts still thought Honda would benefit from Toyota's massive recall, while Ford, GM, Hyundai and Nissan Motor Co also stood to gain market share in the short-term.

Toyota, the world's biggest carmaker, this week suspended North American sales and production of eight models and widened its recall to China and Europe, bringing the total to around 8 million units, more than the number of cars and trucks it sold worldwide in 2009.

Toyota said Friday it would recall eight models in Europe, totaling as many as 1.8 million units in Europe.

A Toyota spokeswoman said the company was still checking on whether any vehicles in Latin America, the Middle East and Africa had an accelerator problem.

Honda said it would recall 646,000 of its Fit/Jazz and City models, including 140,000 in the United States, because of a faulty window switch, after a child died when fire broke out in a car last year.

In an unusual move, House Energy and Commerce Committee Chairman Henry Waxman said the panel would investigate how effectively Toyota responded to concerns about sticking pedals and slipping floormats.

KNOCK-ON EFFECTS

In Tokyo, some worried about the effects on Japan's image and economy.

"If Toyota has hard times, there's a high probability that also Japan will," said Takeo Namekata, a 62-year-old office worker. "Particularly, trade will suffer."

Suppliers were expected to see some fallout.

"If Toyota gets the flu, its suppliers will also be sneezing," said Kevin Chen, president of Gasgoo.com, a major Chinese auto parts trading platform.

International component makers were most at risk, said Tatsuya Mizuno, president of Mizuno Credit Advisory, because it might encourage Toyota to switch to Japanese suppliers, he told Reuters Insider television.

Analysts have estimated the sales halt could cost Toyota at least 50 billion yen ($556 million) in operating profit a month, almost as much as it made in the September quarter.

SAFETY REPUTATION

IHS Global Insight's Da Silva said Japanese carmakers would be able to salvage their reputations as long as they moved quickly to show the recalls were isolated incidents.

Recalls can show companies care about the cars they build, and don't simply wash their hands of them once they are driven away from the showroom, he added.

Toyota shares have dropped 17.6 percent since January 21, when it said it would broaden its recalls by a further 2.3 million vehicles. Shares ended down 2 percent in Tokyo Friday.

Industry analysts and executives estimate it will cost some $250 million in warranty costs alone for Toyota to address the smaller of the two recalls underway in the United States.

The automaker also faces the fallout from the larger recall that began last year and was broadened this week for vehicles at risk of having floormats that can jam under accelerator pedals.

(Additional reporting by Bernie Woodall, Soyoung Kim, Kevin Krolicki in Detroit; Chang-Rang Kim and Taiga Uranaka in Tokyo; Janaki Krishan in Mumbai; Fang Yan in Shanghai; Tiisetso Motsoeneng in Johannesburg; Rhys Jones in London and Helen Massy-Beresford in Paris; Editing by David Cowell)