I have been circulating an estimate of the damage done to Toyota Financial Services:
By Daniel at 5 February, 2010, 11:35 am
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http://en.wikipedia.org/wiki/Toyota_Financial_Services
How you play this stock is a function of the numbers you plug in for:
A) median change in residual values
B) number of leases coming due each quarter / dollar amount
Suffice to say, my back of the envelope work says that changes in residuals are far more serious than the cost of the recalls.
Take the cost of the recall, divide it by “per car” and you get a pretty low number — though it looks awful, with a profit of over $1,000 per car sold, that is not a big deal.
What is a big deal is if the pedal / brake software change do not fix the problem.
Then there has to be a larger recall, at which point, the issue of dropping residuals kick in.
Will this fix actually work?
NOTE: IT is not a simple fix:
“Toyota has said that worn pedals can become difficult to operate or become stuck partly depressed. Its remedy involves installing a small rectangular steel shim into the pedal assembly. The shim comes in seven thicknesses, ranging from 0.056 inch to 0.116 inch, or 1.4 millimeter to 2.9 millimeters, Mr. Davis said. Workers at the dealership remove the pedal assembly, take measurements to determine the proper thickness, install the shim, reattach the pedal and take the car on a two-mile, or three-kilometer, test drive, he said.”
The technician that fixes the pedal have to CHOOSE from 7 thickness of SHIMS, depending on the wear and clearance in the pedal.
A) What this IMMEDIATELY says is that there is plenty of room for the operator to make a mistake in measurement or fitting.
Many Toyota technicians hired to this are temporary workers unskilled in working on Toyotas.
B) The very fact that different thickness are required implies that with additional use / wear, the thickness required can change over time. Does that mean there is now an additional “service” required to periodically remeasure the pedal for proper spacing and re-shim it as needed over time?
Almost certainly that is the case.
C) The pedal fix mentioned makes NO MENTION of the SECRET SOFTWARE CHANGE that will give priority to the BRAKE PEDAL over the Accelerator pedal input.
Why is this information still officially withheld from Customers when EVERYONE know about it?
D) The recalled cars and trucks are a fraction of the cars affected with the same problem.
In the past week, NHTSA is swamped with new filings / cases where the uncommanded acceleration was previously attributed to other causes, but in the cold light of hindsight, are probably additional cases.
DEAR TOYOTA:
You just set yourself up for another recall, a much larger one.
Please do not play semantics with us. You say NO “electronic” problem. Electronic can be taken to mean hardware only, or, software and firmware.
Is that a way to squirm and mislead the public about knowing about software problems which may or may not be “electronic”?
You have a electronic problem broadly defined, INCLUDING but not limited to SOFTWARE, FIRMWARE, and perhaps, Electromagnetic / Electrostatic or other interference / glitches.
There is no way to explain the sweeping failure across the entire line —- up to and including 3% of a small sample of your pride: the Lexus ES 350s surveyed by the NHTSA in 2007.
The fix you are offering MAY or MAY NOT WORK.
Notably, if the Software / Electronics glitch is at a high enough level, the new Brake Pedal override Accelerator command may NOT do the trick.
Upon the first serious incident to happen on your REPAIRED / FIXED vehicles, your company is…. TOAST.
I give that 6 months from March 2010 for it to happen.
Without disclosing to you my estimates (proprietary), I can tell you that a second recall have the potential of bankrupting the company —- or at least, make it run out of cash.
How I plug in my spread sheet values… and how I trade it… are quite proprietary.
FYI, I hold ZERO positions in Toyota or any affiliated company.
Think of me as a research pure play.
- LBX
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