Toyota Motor (TM) has decided to halt production at its facilities in France and the U.K. for at least 12 days in order to cope with the weakening demand for its vehicles. Production at its U.K. facility has been already suspended since yesterday until Thursday and will be arrested again from April 6 to 9. Meanwhile, production at its facility in France will be halted during April 6–9 and in late April.
The latest string of recalls has besmirched the reputation of the automaker, resulting in a lower demand for its vehicles. In February, the automaker’s sales fell 9% to 100,027 vehicles. According to Autodata Corp., the automaker’s U.S. market share fell to 12.8%, the lowest since July 2005.
So far, Toyota has recalled 8.5 million vehicles around the world related to problems such as faulty accelerator gas pedals, slipping floor mats and defective braking systems. The recall included popular models such as the 2010 Prius hybrid and Toyota Camry.
Toyota has been slapped with dozens of lawsuits due to the recall. The value of claims under the lawsuits is estimated to reach about $4 billion, reflecting an average loss of $600 per vehicle.
Kelley Blue Book, the largest automotive vehicle valuation company in the U.S., has stated that Toyota’s resale value is now worth $200 to $500 less per recalled model (a decline of 1%–3%). The auto research website Edmunds.com estimated resale or trade-in values to fall up to 10% in the short term.
To regain consumer confidence, Toyota has been offering unprecedented discounts including zero-percent financing for five years on top-selling models such as the Camry. It has also offered attractive leasing terms and free maintenance for two years for Toyota loyals. Further, the automaker has apologized to the public in the U.S., Japan and China, its three biggest markets.
Last week, Toyota revealed its plans to reorganize its Japanese production facilities for the first time by the end of the decade. The restructuring aims to avoid a backlash from its string of global automotive recalls by boosting productivity, lowering costs and ensuring quality.
Toyota is also making production adjustment at some of its facilities in the U.S. in order to prevent the build-up of inventory due to the recalls.
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