Toyota (TM) Recalls 3.4M Vehicles Worldwide Over Airbag Defect

Zacks Equity Research

Toyota Motor Corporation TM will recall 3.4 million vehicles worldwide due to an electronic defect that could lead to air bags not being deployed in crashes. The recall, which covers 2.9 million U.S. vehicles, will include Corolla 2011-2019, Matrix 2011-2013, Avalon 2012-2018 and Avalon Hybrid vehicles 2013-2018.

The vehicles may have an electronic control unit that does not have adequate protection against electrical noise that may lead to crashes, resulting in the air bags being incomplete or not deployed. It could also prevent the seat-belt pretensioners from operating uninterruptedly.

Toyota dealers will position a noise filter between the air-bag control module and its wire harness, if necessary. The company is expected to notify vehicle owners of the recall by mid-March. However, Toyota has declined to comment on the number of deaths or injuries related to this fault.

Meanwhile, Toyota has also recalled 700,000 vehicles, including its namesake and Lexus brands in the United States, in order to fix fuel-pump issues. These vehicles have fuel pumps that could stop operating, causing the cars to stall, in turn, escalating the risk of a crash.

This Zacks Rank #3 (Hold) stock has outperformed the industry it belongs to over the past year. Its shares have appreciated 15.6% compared with the industry’s rise of 6.3%.

For the past few years, Toyota has been recalling vehicles in large numbers for various safety concerns. Frequent recalls not only affect the company’s reputation but also result in significant expenses and lower the vehicle-resale value. The firm has paid several large fines due to safety defects in some vehicles, as well as to settle lawsuits during this period.

Recently, Honda Motor Co. HMC and Nissan Motor Co. NSANY also made a vehicle-recall announcement, in order to replace the risky Takata airbag inflators that could blow apart a metal canister, hurling shrapnel at drivers and passengers. While Honda is set to recall about 2.7 million in the United States and Canada, Nissan will recall 346,000 vehicles across the globe.

Key Pick

Investors can consider a better-ranked player in the same industry, Tesla, Inc. TSLA), carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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