HINOY Hino Motors Ltd (PK)

Toyota Motor Corp. (7203.TO) will expand its massive recall of vehicles with defective gas pedals into Europe, a person close to the matter said Monday, further denting the auto maker's reputation in the area of quality control.

The person said Toyota expects to recall roughly 2.0 million vehicles in Europe as worn mechanisms in the gas pedals of certain models make it harder to release the accelerator and could result in the pedal becoming stuck in a partially depressed position. Last Thursday, Toyota said it would recall 2.3 million vehicles in the U.S. for the same reason.

Because the company is still working on finalizing the exact number of vehicles to be recalled in Europe, it's unclear when a formal announcement will be made, the person said, adding that the recall volume in Europe could vary, depending on the country's rules for repairing faulty parts.

The combined 4.3 million vehicles to be recalled in the two regions due to the faulty pedal equals 55% of the 7.81 million cars and trucks that the Toyota group including Daihatsu Motor Co. (7262.TO) and Hino Motors Ltd. (7205.TO) sold globally in 2009.

The massive recall is just the latest in a number of quality control issues that have hurt the company's image in recent months.

In November, Toyota issued a big safety recall affecting 4.2 million vehicles in the U.S. over sudden acceleration, which the company said was caused by improperly installed floor mats. Most of the vehicles covered in last Thursday's recall -- 1.7 million -- were part of the earlier action.

The auto maker said last week it is looking into whether the faulty pedals were used in vehicles sold in other markets.

While Toyota has been pushing ahead with cost-cutting steps to return to profitability amid sluggish demand in the U.S. and other major markets, there are growing concerns that the company's attempts to cut corners could have a negative impact on its reputation.

"(The quality control issues) could possibly be due to the fact that the company is prioritizing cost-reduction ... as it aims to return to profitability," Tatsuya Mizuno, analyst at Mizuno Credit Advisory, said.

However, the November safety recall had little impact on Toyota's U.S. sales in December, when its sales soared 32% from a year earlier, driven by demand for its fuel-efficient, low- emission cars.

But Mizuno said these big recalls could eventually weigh on Toyota's sales in the U.S. and Europe, given their large scale.

Also on Monday, Toyota said that its domestic production jumped 18.2% in December from a year to 288,578 vehicles, marking the second straight monthly rise in domestic output.

It also said that its global sales of 7.81 million vehicles for 2009 topped Volkswagen AG's (VLKAY) annual sales of 6.29 million vehicles for last year.

Still, when the German car maker's volume is combined with that of Suzuki Motor Corp. (7269.TO), in which Volkswagen took a 19.9% stake earlier this month, their aggregated sales of 8.6 million vehicles exceed Toyota's volume.

-By Yoshio Takahashi, Dow Jones Newswires; 813-6269-2791; yoshio.takahashi@dowjones.com

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