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Autos Weekly: Toyota's Troubles Continue

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It was a week that saw Tesla Motors' (Nasdaq: TSLA  ) shades-of-1998 IPO, General Motors' management finally getting real with the investment community, and Ford (NYSE: F  ) making another big improvement to its balance sheet. But as always, there was much more going on behind the headlines -- here are a few stories that you might have missed.

Toyota's latest recall adventure
Add another 270,000 vehicles to the millions recalled by Toyota (NYSE: TM  ) over the last year: The Japanese giant said on Thursday that the vehicles -- mostly large sedans, including the popular-in-Asia Toyota Crown and several Lexus models -- are being recalled due to an engine problem that can cause them to stall while moving. According to some reports, drivers in Japan have told Toyota that their engines made a "strange noise" before cutting out.

It's another dent in Toyota's quality armor in what has been a year of safety-related woes. But at this round of recalls -- like last week's recall of 17,000 Lexus hybrids for a flaw that could cause a fuel spill in a crash -- appears to have come with a minimum of foot-dragging. Toyota was hit with a record $16.4 million fine by the U.S. government earlier this year for repeatedly delaying action on potential safety defects, and the company has been at pains to show that it has changed its ways.

GM takes on Tata
In the wake of news that General Motors' first-half sales in China led those in the U.S. for the first time comes a report of a new emerging-markets effort by the General: A joint venture with China's SAIC to produce a new car for the Indian market -- one intended to rival Tata Motors' (NYSE: TTM  ) Nano.

Tata's Nano, of course, is the much-talked-about world's cheapest car -- and it has been rocketing up the sales charts, pushing Tata's June sales into second place among automotive brands in India. GM, like Ford, has been coming on strong in India, however, with its June sales double those of a year ago, and the General clearly sees an opportunity to expand downmarket. By partnering with SAIC, a leading low-cost automaker and longtime joint-venture partner of GM's in China, GM hopes to be able to bring in its new model for about the price of a loaded Nano -- roughly $5,000 -- when it launches in a couple of years.

Tesla's wild ride
Tesla Motors finally went public on Tuesday, and the electric car company's first week on the Nasdaq was a wild ride indeed. Initially priced at $17 -- solidly above the $14 to $16 range anticipated by analysts -- Tesla's shares blasted out of the gate, briefly crossing $30 on Wednesday before falling back to the low $20s.

It was a dramatic debut for one of Silicon Valley's most talked-about companies, but this Fool continues to wonder what, exactly, all the fuss is about. Tesla's much-hyped "technology" doesn't seem like anything special when compared to what the major automakers will be launching in the near future, and the launch of the ballyhooed Model S is -- by Tesla's own reckoning -- at least two years off.

Nissan has already received more than 15,000 $99 deposits from potential U.S. buyers of its upcoming all-electric Leaf sedan, due later this year. What will Nissan -- and Ford, and GM, and Toyota, and Honda (NYSE: HMC  ) , and others expected to jump into the green-car space -- be offering two years down the road, when Tesla's sedan finally comes to market?

As I write this on Friday morning, Tesla's stock is down over 6% -- it appears that the short-sellers have arrived. But are they -- and I -- missing something? Do you think Tesla is going to change the world? Or are they doomed? Scroll down to leave a comment and let me know.

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Fool contributor John Rosevear owns shares of Ford. Ford is a Motley Fool Stock Advisor selection. You can try Stock Advisor -- currently beating the S&P 500 by over 40% -- or any of our Foolish newsletters free for 30 days with no obligation. The Motley Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 03, 2010, at 1:37 PM, baldheadeddork wrote:

    A couple of notes about the new Toyota recall. The problem is defective valve springs, and the labor involved in repairing those is going to make this very expensive for Toyota. The retail cost on this repair would be well over $2000. Toyota will save some on parts markup and they'll get some discount on the retail labor rate, but not a lot. 270K cars times, say, $1500 per - you're looking at a ballpark figure of $400 million for this recall.

    The other part is that this recall is a great example of how Toyota's cost saving campaign that created a lot of the hits on their quality will take years to surface, and even more years to eradicate. This recall is for 2006-2008 vehicles. If Toyota is recommitting itself to the quality standards it had in the 70's and 80's, it's going to be years before that can be applied to every part on every Toyota. Until then (2015-ish), expect to see more of these announcements from TM.

    June numbers came out on Thursday and they fell in with expectations for moderately better performance than 2009 but down from May 2010. There were some interesting data points in the numbers, however. GM car sales were down sharply compared to last year, even though their top selling car (Chevy Malibu) was up 80%. I dug through the model sales and nothing in production now is down more than a couple percent, which means the drop is from the Pontiac and Saturn sales that don't exist anymore.

    The June incentive numbers are out from Edmunds, and they show a continuation of what we've seen for most of 2010. GM and Toyota racked up another month of being the only automakers to offer higher incentives than last year. GM's incentives are still running 20% higher than Ford's (at a cost of $136 million last month) and GM has still lost market share compared to last year.

    But at least GM is getting something (#1 bragging rights) for their incentives. Toyota's incentives are up 63% from June 2009, but their market share continues to slide.

  • Report this Comment On July 03, 2010, at 1:39 PM, baldheadeddork wrote:

    Oh, and Tesla = Flooz on wheels.

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