Oh What A Feeling

Toyota's troubles are just beginning as the automaker faces the next stage of its recall disaster:  the inevitable safety lawsuits.

Fixing millions of gas pedals and brakes and convincing customers their vehicles are safe could end up being the least of Toyota's challenges. Some experts think the price tag from legal settlements could end up topping the company's estimate of $2 billion in recall costs.

There are already more than 30 U.S. lawsuits filed against Toyota involving the problems with its gas pedals alone, according to Craig Hutson, senior investment grade analyst at Gimme Credit, a bond research service firm. And there are more lawsuits are in the works.

"Lawyers are champing at the bit to get at these guys, and the company has come out and largely admitted mistakes in respect to these issues," said Hutson. "It's hard to put a dollar amount on it, but multi-billion dollar costs are not out of the realm of possibility."

Hutson isn't alone in worrying about how much lawsuits could hurt Toyota. Credit rating agency Moody's cited the litigation risks when it warned Tuesday that it might downgrade Toyota's credit ratings.

The company also faces at least one class action suit involving problems with the brakes on 2010 models of the Prius and other hybrid vehicles. Toyota announced a recall for those hybrids Tuesday.

New reports of problems with the steering of its Corolla could mean more lawsuits against Toyota.

These legal problems could tie up Toyota for years.  They will want relief from the Obama administration, certainly.  They will threaten to take jobs and leave the country if they don't get it.  I fully expect the GOP to start siding with Toyota here and soon, especially from southern red states where Toyota has union-free labor (Kentucky is a good example, Toyota has significant operations here in NKY in both manufacturing and parts.)

It'll happen soon.  The GOP can't help itself.  Will it happen before the 2010 elections?  I'm betting in at least some places it will.  You'll see the GOP coming out saying what we need to fix Toyota's problems is tort reform and tax cuts to keep Toyota from bolting.

If you believe that'll solve Toyota's problems with their cars, then you're reading the wrong blog.