TORONTO - The fact that a faulty accelerator implicated in a massive recall of Toyota vehicles was manufactured in Canada will have a negligible impact on the Canadian auto parts industry, says the head of an association representing suppliers.
In fact, it could end up being a positive for one Canadian plant. The manufacturer that built the defective part, Indiana-based CTS Corp. (NYSE:CTS), said Thursday it's ramping up production to keep up with demand for a replacement pedal at its three plants that currently supply Toyota, which include a factory in Mississauga, west of Toronto.
"I don't think this will have any lasting impact on the view of the Canadian supply base and capability," said Steve Rodgers, president of the Automotive Parts Manufacturers' Association.
The association represents hundreds of parts suppliers to the Detroit Three carmakers - GM, Ford and Chrysler - and Japanese assemblers such as Toyota and Honda in Ontario and in the United States.
The problem with the pedal was a defect in Toyota's design, not in CTS's manufacturing, CTS chairman and CEO Vinod Khilnani said Thursday. In rare cases and under "extreme environmental conditions," the pedals have been known to stick and return slowly to their idle position due to condensation. Both Toyota and CTS say they are unaware of any injuries or accidents due to the CTS pedal.
"I don't think it comes down to a particular black mark on Canadian suppliers in general. It is just always an issue for suppliers as to how to manage this risk, how to try and duplicate the test environments and be aware of all of these potential factors that can have impacts," Rodgers said.
"It simply shows you how complex the overall manufacturing process for a car can be."
The faulty pedal resulted in the recall of 2.3 million vehicles in the U.S. and 270,000 in Canada, as well as a company-mandated sales suspension of the affected vehicles. Vehicles have also been recalled in Europe and China.
Khilnani said CTS will add production lines at some of its factories to meet demand for the replacement pedal. The company did not respond to questions about whether the Mississauga plant would see the addition of another production line.
"We have been asked to ramp up the production as fast as we can and we are in the process of adding some capital expenditure, additional production lines, to meet their needs as quickly as possible," Khilnani said on a conference call.
There has been speculation that Toyota could use pedals manufactured by Japanese supplier Denso Corp. - which employs about 300 people at a plant in Guelph, Ont. - to replace the faulty CTS pedals, but Khilnani dismissed this.
"I have no knowledge of that," he said. "CTS is working hand-in-glove with Toyota, and as we speak we have Toyota people in our factories working with us to help us see how we can ramp up the production as rapidly as possible so that they can do the replacement pedals and implement them very, very quickly."
In a release sent out Thursday, Toyota confirmed that redesigned pedals are in "full production" at CTS plants.
"We commend CTS for working diligently and collaboratively to find a solution to the potential problem and in developing a new design," stated Chris Nielsen, vice-president of purchasing at Toyota Motor Engineering and Manufacturing North America. "CTS is a long-term and valued supplier to us."
Khilnani said Toyota is a "small but important customer" that accounts for only 3.2 per cent of the company's annual sales, and he doesn't expect the recall to have any financial impact on CTS in the longer term.
The two companies are also working on a "field fix" to the problem, or modifications that can be applied without having to replace the entire pedal.
Both Toyota and CTS say they are unaware of any injuries or accidents due to the CTS pedal.
CTS also makes pedals for Honda Motor Co., Mitsubishi Motors, Nissan Motor Co. and Ford Motor Co., but the company said pedals made for those manufacturers don't have the same design. Still, Ford on Thursday halted production of some full-sized commercial vehicles in China because they contain CTS gas pedals.
The Toyota sales suspension, announced earlier this week, includes the following models: the 2009-10 RAV4, 2009-10 Corolla, 2009-10 Matrix, 2005-10 Avalon, certain 2007-10 Camrys, 2010 Highlander, 2007-10 Tundra, and the 2008-10 Sequoia.
Some rental agencies have responded by suspending rentals of the affected vehicles, and Toronto-based Discount Car and Truck Rentals said it has begun servicing its Toyota fleet.
"A portion of our Toyota fleet has already been inspected by Toyota factory trained technicians and with the help of Toyota's dealers, we are working on getting the remainder of our Toyota fleet looked after as efficiently as possible," stated president Herb Singer.
"Discount will only rent Toyota vehicles that have been given clearance by a certified Toyota dealer."
As a result of the sales suspension, production at Toyota's two Canadian manufacturing facilities, in the Southern Ontario communities of Woodstock and Cambridge, will be halted for the week of Feb. 1.
The Japanese automaker produces the Corolla and Matrix at its plant in Cambridge and the RAV4 at its plant in Woodstock. The company recently said it would hire 800 new employees at its Woodstock plant to increase production of the RAV4. Once that hiring is complete, it will employ about 6,500 Canadians.
Last year, Toyota garnered 14 per cent of the Canadian market, with 189,313 Toyota-brand vehicles and 15,802 Lexus-brand vehicles sold. Compared to 2008, Lexus sales were up 5.3 per cent while Toyota sales were down 9.5 per cent. In November, Toyota came first place in terms of Canadian market share for the first time in its history.
The announcement Tuesday follows a larger U.S. recall months earlier of 4.2 million vehicles because of problems with gas pedals becoming trapped under floor mats, causing sudden acceleration. That problem was the cause of several crashes, including some fatalities. CTS was not implicated in the earlier recall, which was expanded Wednesday to add another 1.1 million vehicles.