WRAPUP 8-Toyota faces new probe on Corolla steering

(For more on Toyota's safety recall, click on [ID:nN27231388])

* U.S. regulators start formal probe into Corolla steering

* Toyoda: No plan to appear before Congress

* Rep. Issa: Is there a Japan-U.S. disconnect at Toyota?
(Adds analyst, Toyota quality chief quotes; updates shares)

By David Bailey and Chang-Ran Kim

DETROIT/TOKYO, Feb 17 (Reuters) - U.S. regulators launched
a preliminary investigation into reported steering problems on
the Corolla sedan on Wednesday as Toyota Motor Corp (7203.T)
faced questions from U.S. lawmakers on whether it had ignored
red flags on safety before a wave of vehicle recalls.

The National Highway Traffic Safety Administration has
received more than 150 complaints about possible steering
problems in 2009 and 2010 Corolla models, a U.S government
official said. [ID:nN0937270]

The agency began reviewing complaints about the Corolla
models last week and on Wednesday determined that the evidence
warranted opening a preliminary evaluation, according to the
official who asked not to be named because the plan has not
been announced.

The Corolla is Toyota's second-most popular model in the
U.S. market, behind the Camry.

Such preliminary investigations are a common step by NHTSA
and are often closed before being upgraded to a second-stage
investigation or prompting a vehicle recall.

Toyota spokeswoman Cindy Knight said the automaker was
aware of the Corolla steering complaints and would "cooperate
fully with NHTSA's investigation."

Toyota's quality chief, Shinichi Sasaki, said at a briefing
in Tokyo on Wednesday that it was not yet clear if the problem
is due to the steering, tyres or another part, and that there
would only be a recall if the issue was deemed to be a safety
breach.

"Our internal studies have shown that drivers have
complained about a change in steering response versus the older
Corollas possibly due to a switch from a hydraulic power
steering system to an electronic one," Sasaki said.

But the move comes at a time when Toyota and U.S. safety
regulators are under intense scrutiny for their handling of
safety complaints related to unintended acceleration in Toyota
vehicles going back a decade.

Toyota is being challenged by U.S. lawmakers to answer the
criticism that the company's practice of tightly controlling
key decisions in Japan had contributed to its deepening
problems in the U.S. market and criticism that it has not been
forthcoming with safety regulators.

In a move that raised the stakes for a pair of
congressional hearings next week, Toyota President Akio Toyoda
said he would send North America chief Yoshimi Inaba to testify
instead of making an appearance himself.

Toyoda, grandson of the 77-year-old automaker's founder,
said he believed Inaba was the logical choice to testify.

"I have full confidence in the management of Toyota Motor
North America, led by Mr. Inaba, and I believe he is the best
placed to testify," Toyoda told reporters at his third news
conference in two weeks.

The statement by Toyoda came a day after the automaker
moved to cut production in the United States and NHTSA opened
an investigation into whether it had acted in a timely way in
responding to safety complaints. [ID:nN16223813]

A series of vehicle recalls since January have damaged
Toyota's once-vaunted reputation for quality and safety. Up to
34 crash deaths have been blamed on unintended acceleration in
Toyota vehicles since 2000, according to complaints filed with
U.S. regulators. [ID:nN15167918]

Toyoda faces a deepening crisis just seven months into his
tenure as the automaker's chief. He said Toyota may have grown
too fast in recent years, outstripping its ability to ensure
that vehicle quality standards were maintained.

Two congressional panels plan hearings next week to look
into Toyota safety issues. The U.S. House Energy and Commerce
panel moved its hearing to Tuesday instead of Thursday. The
U.S. House Committee on Oversight and Government reform is
scheduled to hold a hearing on Wednesday.

The top Democrat and Republican on the oversight panel
asked major insurers for information they may have provided to
U.S. safety regulators on reports of unintended acceleration in
Toyota vehicles.

State Farm, the largest U.S. auto insurer, said last week
that it had warned NHTSA about a worrying trend of Toyota
accidents in 2007.

Rep. Darrell Issa, the ranking Republican on that
committee, also sent a letter to Inaba asking him to answer a
series of questions about when Toyota became aware of safety
problems with its cars.

Issa also told Inaba to submit a written answer by Monday
discussing whether there was a "disconnect" between the
company's U.S. operations and its Japan headquarters as critics
have charged.

Specifically, he asked about a team of NHTSA officials
dispatched to Toyota's headquarters in December to deliver the
message that the automaker was not moving fast enough to
address the U.S. government's safety concerns.

"Why was it necessary for NHTSA officials to visit Japan in
order for Toyota to recognize its obligations under U.S. law?"
Issa asked in his letter to Inaba.

Toyota also said on Wednesday that it would install a brake
override system on all new vehicles after global recalls for
acceleration and braking problems that affect 8.5 million
vehicles.

LOSS OF PUBLIC TRUST?

Former NHTSA chief Joan Claybrook, a vehicle safety
advocate who is scheduled to testify before Congress, said
Toyota should install brake override systems on vehicles it has
already sold, not just new models.

"The American public has lost trust in Toyota and they need
to regain that trust," Claybrook said.

Complaints about unintended acceleration in Toyota vehicles
in the United States have been rising since it began installing
electronic throttle controls on its vehicles a decade ago.

Meanwhile, analyst doubts have been deepening about the
pace of Toyota's earnings recovery. Only two weeks ago, the
company estimated the recalls would reduce global sales by
100,000 units in the financial year to the end of March.

Toyoda said production cuts had been within expectations so
far and he believed the company could stem further sales
declines, although it was impossible to tell for sure.

Toyota executives have told dealers that they will roll out
a package of incentives in March to keep customers from
defecting to rival brands.

Toyota shares, which have fallen a fifth from a peak on
Jan. 21, dipped 0.4 percent in Toyko trade.

"Investors, though not overly optimistic, are welcoming
Toyota's efforts to move away from behaviour that has hurt
trust in it, while they expect political pressure to remain
against Toyota in the United States in the near term," said
Kazuhiro Takahashi, general manager of investment strategy at
Daiwa Securities Capital Markets.
(Additional reporting by Yumiko Nishitani and Yoshifumi
Takemoto, John Crawley in Washington and Steve Gorman in Los
Angeles; Writing by Kevin Krolicki; Editing by Lincoln Feast,
Karen Foster, Matthew Lewis and Phil Berlowitz)