Financing the Toyota Recall.
In May of 2006, The Toyota Motor Corporation initiated a recall of nearly one million vehicles around the world to replace faulty parts that could cause drivers to lose control of the steering wheel. The recall affected vehicles across 10 models, including the popular Prius. The intermediate shafts and sliding yokes in the recalled cars lacked the necessary strength and could distort or crack under strong pressure, causing drivers to lose control of the steering wheel, according to Toyota (ConsumerAffairs.Com). Owners of these vehicles were allowed to have these defects repaired at the cost of Toyota and required approximately on hour to complete (News.com.au). BODY
Dealing with any recall is never a positive situation and our estimates are this particular recall will cost Toyota in excess of $925 million dollars. Toyota will most likely borrow from its future earnings at nominal discount rates. However, given Toyota's positioning as the world's eight largest and most profitable automobile company they will be able to take this problem in stride. The biggest danger associated with the recall will not be short term capitalization. To maintain its impressive rate of growth Toyota will have to conduct effective public relations damage control in an attempt to safeguard its stellar reputation as a manufacturer of highly reliable automobiles. The Toyota Motor Corporation has been around for greater part of last century. It really started to make a strong entry in the North American and European car markets in the mid 1970's. Their successful product offering combining low prices and high reliability have been huge factors in its successful profitable market-share growth ever since. Toyota Motor Corporation is a Japanese multinational corporation and the world's second largest automaker making automobiles, trucks, buses and robots and providing financial services. Based in Toyota, Aichi, Japan, the company...
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