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Last week, Toyota (NYSE: TM ) said it would recall 2.3 million vehicles in the U.S. to fix sticking accelerator pedals. On Tuesday, the Japanese automaker ordered dealers to suspend sales of eight models that may be affected.
I wish I were surprised by this news. I'm not. Toyota warned in November that as many as 4.2 million vehicles could be affected by an accelerator pedal problem. Of those, 1.7 million are subject to the present recall, Bloomberg reports.
It's a stunning turnabout. In late 2008, Fools wondered aloud whether Ford (NYSE: F ) would be dismantled in bankruptcy. Yesterday, the automaker reported its first annual profit since 2005 as its once-mighty Japanese rival struggled to allay the fears of concerned customers.
Toyota's reputation for quality, once on par with premium names such as FedEx (NYSE: FDX ) and Procter & Gamble (NYSE: PG ) , is waning. Last month, The Los Angeles Times published an expose in which it found that the automaker had a surprising history of obscuring defects in some of its vehicles. The stock has suffered since and is down by more than 15% from last weeks' high. Honda Motor (NYSE: HMC ) is down by 6% over the same period.
Taken for a ride
To me, the sell-off in Toyota shares is well deserved. I'm among those who've been on the business end of the company's stiff-arms. Our Sienna minivan's system for preserving and regulating run-flat tires has failed repeatedly, costing us thousands.
What's frustrating is how Toyota has chosen to deal with the issue. The local dealer denies there's a problem of any kind with the vehicle, even though there's extensive evidence that older Sienna models like ours suffer when equipped with run-flats.
Toyota won't be as lucky with this recall. There are too many cars involved, too many dealers likely to be affected, too much media coverage, and too severe a problem.
Don't think this is over, Fool. It's only just beginning.
But that's my take. Now it's your turn to weigh in. What will it take for Toyota to recover its reputation? Would you short the stock now? Would you buy? Make your voice heard using the comments box below.