Toyota Recall: Toyota Shares Climb on Fix

Toyota stock and volume are swelling following the automaker's announcement of a solution to its "sticking accelerator" problem, while Honda confronts its own recall issues.
By Andrea Tse ,

(Toyota and Honda recall article updated with stock closing prices.)

NEW YORK (

TheStreet

) --

Toyota

(TM) - Get Report

stock and volume are swelling following the automaker's announcement of a solution to its "sticky accelerator" problem, while

Honda

(HMC) - Get Report

, confronting its own recall issues, is essentially flat on the day.

Toyota ADR's settled at $79.90, up 3.8% on Monday. At the closing bell, about 3 million Toyota shares had traded hands, compared with an average three-month daily trading volume of about 554,000 for them.

Vehicles Affected in the Toyota Recall

Meanwhile

Ford

(F) - Get Report

stock closed up 2.6% to $11.10 and

Daimler

(DAI)

rose 2.1% to $46.80.

Toyota announced today that the remedy for its "sticky accelerator" problem involves installing a precision-cut steel reinforcement bar into the accelerator-pedal assembly that creates a space to reduce the surface tension between the friction device and a component called the pedal arm.

According to the company, the bar also strengthens the reaction force of the spring that returns the accelerator pedal to its non-pressed position.

Toyota also addressed the cause of the "sticky accelerator" problem, claiming that in the accelerator-pedal assembly of affected vehicles, condensation -- resulting from cold-weather use of the heater or other causes -- may form on the worn surface of what is known as a friction device.

And if this occurs, there is a possibility that, in the worst case, the accelerator pedal returns slowly or doesn't return to its idle position.

Toyota said that it's preparing to have US dealers apply the remedy to affected vehicles. Toyota adds that priority is being placed on addressing vehicles already in the marketplace, and considerations are also being made toward recommencing sales and production of the vehicle models concerned.

Toyota plans to implement a similar remedy in Europe, China and other countries and regions, where details are to be worked out with local authorities.

Toyota is recalling up to 9 million vehicles globally, including 2.3 million in North America, and has suspended production of eight car models in the U.S. while it has worked to determine how to fix the problem.

At first, observers said that the quality perception of rival Honda would likely increase as a result of Toyota's problems, but Honda now has problems of its own to deal with. Honda is reportedly recalling 646,000 of its Fit/Jazz and City vehicles worldwide, concerning a problematic window switch connected to the death of a child when a fire broke out in a car last year.

On Friday, Honda U.K. said it is set to contact 171,372 owners of the Jazz (2002-2008 year model) to arrange an examination of the master power window switch.

Nevertheless, Art Spinella, head of Bandon, Ore.-based CNW Marketing Research, says that Honda's quality perception is unlikely to take a significant hit from the news.

"Honda's had problems going back to the seventies," Spinella explained. "But for the most part they're overlook. Kind of like with

Harley

(HOG) - Get Report

owners. They think it comes with the territory."

As for Toyota, the solution that it has found for the "sticky accelerator" problem won't boost its quality perception by that much, according to Spinella; the company's been experiencing a "deterioration" in quality perception "over a number of years," he said.

Honda stock finished the day at $33.80, down 0.4%.

-- Reported by Andrea Tse in New York

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