SPECIAL REPORT-Toyota warned dealers of crash risk in 2007

BULLETINS ON OIL LEAKS AND RUST

Other Toyota bulletins sent to dealers in the past two months have detailed fixes that are not being treated as recalls but appear to fall in the gray area that includes potential safety issues, according to a review by Reuters, safety experts and the policies of rival automakers.

Owners of 2000 to 2003 model-year Tundra trucks in warm-weather U.S. states are being told that they can take their trucks in for inspection to see if a rear part of the frame has become dangerously rusted.

In November last year, Toyota had recalled Tundra pickups sold in cold-weather states where the risk of damage from winter road salt is higher. The extended repairs were called a "special service campaign" rather than a recall.

Toyota warned in its notice to dealers that the frame rust could "cause a crash without prior warning." Spare tires could drop from the truck during driving, it said. The worst case: "The fuel tank may drop to the ground and be dragged or separated from the vehicle." Toyota's closest competitors, Honda (7267.T), Nissan (7201.T) and Hyundai (005380.KS), said they would not extend an existing recall with a service bulletin.

Toyota launched a "limited service campaign" in February to fix almost 934,000 vehicles with a potentially faulty oil hose. The repair, which does not count against Toyota's growing recall tally, was communicated first to dealers.

The automaker confirmed the repair campaign on March 1 after it was reported by Reuters and other media. The vehicles affected by the repair included the Camry, Avalon, RAV4, Lexus ES 350 and RX 350. "Toyota is currently investigating how this condition may affect other Toyota vehicles," the automaker said in its talking points for dealers.

A search of the NHTSA complaint database shows four cases where consumers reported the problem causing spray of oil while driving and engine smoke or fire. "I am concerned that something like this might happen with catastrophic results," the owner of an RX 350 wrote to safety regulators in August 2009. A RAV4 owner in California said the small crossover caught fire on the interstate in February 2009.

A Toyota mechanic told the driver that it was a relatively common problem. "That made me livid," the consumer wrote NHTSA. "I am furious that it appears Toyota was well aware of this problem ... I am asking for a full investigation, which, hopefully, will lead to a recall."

CALLS FOR REFORM

Service bulletins are reviewed by NHTSA each month and a one-line summary is posted on the agency's website. Consumers can order full copies for a fee. It can take weeks to process them.

Critics contend that many bulletins are never fully scrutinized.

"We support efforts to make service bulletins available to the public," said Clarence Ditlow, director of the Center for Auto Safety and one of the other outside experts called to testify in the recent Toyota hearings. "Now we need to get our government to say that if manufacturers are going to play these kinds of games, we have to get tough."

Ami Gadhia, policy counsel for Consumers Union, the non-profit publisher of Consumer Reports, an influential guide whose endorsements helped build Toyota, said the group would also back a review of disclosure standards as part of an effort to reform the system.

"It definitely bears examination both by Congress and by NHTSA whether the recall process is working as it should," Gadhia said.

None of the major automakers are in favor of an overhaul of service bulletin system, saying the issue is best left to the Department of Transportation.

But there are signs that the scrutiny Toyota is facing has changed the way the rest of the industry is approaching the question of recalls.

GM, wary of getting caught up in the safety debate, scrapped plans this year to roll out its plug-in hybrid Chevy Volt ahead of schedule. Delivering the Volt to consumers before its official launch this fall would have required GM to recall the early models for software upgrades for its battery system, retiring Vice Chairman Bob Lutz said.

Lutz said he had initially argued that GM should "do it quietly and just go in there and fix them" -- through the equivalent of a service bulletin. But then he was reminded of the safety debate after Toyota and agreed GM could not take the risk of being accused of making quiet fixes to a highly touted vehicle.

"Some people are in very serious trouble for doing just that," Lutz told Reuters.

(Additional reporting by David Bailey in Detroit, John Crawley in Washington and Steve Gorman in Los Angeles; editing by Jim Impoco and Claudia Parsons)

For a graphic on Toyota sales and recalls, see: link.reuters.com/zej74j

Some of the original documents used in preparing this special report can be found at the following links: here here here here here