Toyota tells U.S. agency seat issue could lead to recall

DETROIT (Reuters) - Toyota Motor Corp <7203.T> has alerted U.S. safety officials that seat material in several vehicles, including the top-selling Camry sedan, does not meet fire retardation standards and could result in a recall.

The Japanese automaker said Thursday it has stopped selling eight recent-model vehicles equipped with seat heaters in North America following an alert from South Korean safety officials that the material did not meet their fire retardation standards, which are also used in the United States.

The cars were built in the United States starting in August 2012, and some were exported to South Korea.

Toyota said there have been no reports of fires or injuries related to the problem. The safety standard requires a certain burn rate as a flame moves across the seat heater's cloth pad.

Toyota said the number of affected vehicles at its U.S. dealers totaled about 36,000, or about 13 percent of dealer inventory, but that does not include vehicles in transit to dealers or those already sold to consumers. In the United States alone, the number of affected vehicles could top 111,000, according to research firm Kelley Blue Book.

From the hit it took to its quality reputation during past recalls related to unintended acceleration, Toyota has learned that it cannot delay action on these issues, Kelley Blue Book analysts said. But the decision to stop selling high-volume models with seat heaters will be costly.

"The timing of this issue, and its impact on Toyota's most popular models, couldn't be much worse," Kelley Blue Book senior analyst Karl Brauer said. "Given that much of the U.S. is currently in the grips of a record cold snap, there's sure to be high demand for models with seat heaters.

"Toyota officials appear confident there is no risk and as a result they feel any hit to the company's reputation would be short-lived and less costly than a full recall," he added.

From late 2009 to early 2011, Toyota recalled nearly 19 million vehicles globally related to unintended acceleration claims. In 2010, Toyota President Akio Toyoda apologized for the company's handling of the recalls and said he would insist on customer safety first.

Toyota was fined $17.35 million in December 2012 for being slow on a recall, still the single highest civil penalty ever paid to NHTSA for violations stemming from a recall, according to a spokesman for the agency.

In July 2013, a U.S. judge approved a settlement valued at more than $1.6 billion to resolve economic-loss claims resulting from the alleged safety defects. The company is also in the process of trying to settle related personal-injury lawsuits.

Toyota spokesman John Hanson said on Thursday the company has informed the U.S. National Highway Traffic Safety Administration of the problem and would file an official report outlining the noncompliance with the standard. He added that Toyota did not feel a recall was necessary.

"We don't believe that it is a defect issue or a safety-related issue because there has been no occurrence of any problems out in the real world," said Hanson, adding that consumers can still use the seat heaters.

The petition that Toyota will file with NHTSA says the problem is "inconsequential" in relation to vehicle safety, even though the cars are no longer being sold by dealers because they do not meet U.S. safety standards, he said.

The NHTSA will make the final determination on whether a recall is needed. Hanson said he did not know the timetable for that decision.

NHTSA officials had no comment.

Affected vehicles are the Camry mid-sized sedan, Camry hybrid, Avalon sedan, Avalon hybrid, Corolla subcompact, Sienna minivan and Tundra and Tacoma pickup trucks equipped with seat heaters that have been sold since August 2012, when the fabric supplier was changed, Hanson said.

From the start of August 2012 through the end of 2013, Toyota in the United States sold 1,396,807 of the affected models, including those without seat heaters, according to Kelley Blue Book. Eight percent of the 2013 and 2014 model-year vehicles were sold with seat heaters, suggesting more than 111,000 in the United States have the noncompliant parts, KBB said.

Toyota dealers have been told to stop selling any of the affected vehicles until the seat heater can be replaced, Hanson said. The automaker will address requests by individual owners to replace the part at no cost on a case-by-case basis.

Toyota found out about the problem when it was notified that the seat heater did not pass a test conducted by the Korean Automotive Test and Research Institute (KATRI), which uses the same standard as NHTSA, Hanson said.

(Additional reporting by Yoko Kuboto in Tokyo; Editing by Dan Grebler and Peter Galloway)