Toyota Saga Continues With Damaging Accusations

Toyota Motor Corp (TM) once again finds itself in the hot seat of a public relations challenge. Yesterday, US Regulators announced that they would undergo a formal investigation on Toyota’s Corolla model years 2009 and 2010. This puts yet another of Toyota’s most popular cars in the sights of a growing nightmare for the world’s largest auto maker. To be clear, the investigation is not a recall, but if it were to lead to that it would affect about 500,000 cars.

Today another potentially damaging bit of breaking news hit the wires Thursday afternoon via Reuters, as a former lawyer for Toyota named Dimitrios Biller claims he has proof of an orchestrated cover-up where Toyota either systematically hid or destroyed legal evidence. The House Oversight Committee panel charged with the investigation has subpoenaed some of the more than 6000 internal documents that the former employee took with him when he departed Toyota back in 2007.

Of course, one must consider the source, in this case a disgruntled former employee who has already filed suit against the automaker. Just because he has alleged wrongdoing does not make it so, but if this is in fact true, it would make this sorted affair all the more damning to Toyota’s reputation. Also, it might open the door to still more legal battles ahead, and maybe even criminal charges. However, that will all take time to play out and it is all dependent on this former employee actually having some tangible evidence of a cover up.

As we noted when we first wrote about the recalls and their effect on TM stock (Toyota’s Stuck Accelerators Cause Investors to Slam on the Brakes), the short term impact of suspended sales and idling factors is certainly a cause of concern. However, what is potentially more damaging is the reputation of quality and safety that Toyota worked so hard to attain now seems to be crumbling under their feet. Even a hint of a cover-up could be very damaging to consumer perception. At this point, our valuation remains negative or Overvalued on TM, and we would not touch these shares until all of the dust has settled which may take quite some time.

Toyota Saga Continues With Damaging Accusations

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