Special Coverage

Toyota's Safety Crisis

Owners of Toyota Motor Corp. cars and trucks affected by the massive recalls issued for sticky accelerator pedals and bulky floor mats likely will see a significant but temporary drop in residual values, says a director at car-pricing guide Kelley Blue Book.

“The vehicles that have been impacted are no longer being sold at auction, but we speculate there is going to be an impact on these vehicles’ (residual values),” Eric Ibara, Kelley Blue Book’s director-residual value consulting, tells Ward’s.”

The fix, a reinforcement bar that will reduce excess friction in the pedal assembly, is set to arrive late today or Wednesday at Toyota dealerships in the U.S. Some dealers will remain open 24 hours a day to handle the repairs, and Toyota will persist in its attempt to contact effected customers until it has 100% compliance.

Affected vehicles are the ’09-’10 RAV4; ’09-’10 Corolla; ’09-’10 Matrix; ’05-’10 Avalon; ’ 07-certain ’10 Camrys; ’10 Highlander; ’07-’10 Tundra and ’08-’10 Sequoia.

Toyota has stopped selling the vehicles until the problem is fixed. As such, Ibara says there is no way to accurately determine the impact on Toyota residual values until these modesl are back on the market.

Toyota vehicles currently have the highest residual values, followed by Honda Motor Co. Ltd., according to Kelley Blue Book.

However, Ibara points to Ford Motor Co.’s August 2000 callback of the Explorer SUV as a result of defective Firestone tires to predict the impact of Toyota’s recall on residual values.

“Explorers had a large impact on auction values immediately, and I think that was compounded by the number of them coming to market,” he says. “Long-term, I don’t think (Explorer) values were impacted as negatively as they were immediately. People remember something because it’s on the news, but three years later it’s not on their minds.”

Jon Harmon, a top public-relations official at Ford during the recall, says the auto maker faced lawsuits from drivers involved in accidents due to the faulty tires, as well as a class action by owners over plummeting residual values.

“There are so many different tales and effects of crises like this, nearly all of which can lead to litigation,” Harmon tells Ward’s.

History may repeat itself in the case of Toyota. Numerous lawsuits reportedly are being filed against the auto maker over injuries due to unintended acceleration, and there is talk of class-action suits against Toyota over the drop in residual values.

In Ford’s case, the class action resulted in the auto maker issuing $500 vouchers for owners to purchase a new Explorer or a lesser amount to buy another Ford product.

Ibara declines to speculate on whether Toyota faces a similar outcome. It all depends, he says, on how Toyota handles the recall and communicates with the public.

“What’s working against them is they claim to have had a fix last fall, and it turned out replacing the floor mats was not a remedy,” he says. “So they really need to make sure this fix takes care of the problem. If they handle the recall well, we think there will be little impact (on residual values) three to five years down the road.”

Ricky Beggs, vice president and managing editor of the Black Book price guide, says he has seen “no major adverse effect” at auctions on the interest and sale price of Toyota products since the recall was announced.