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Toyota Facing Lawsuits, Possible Credit Ratings Downgrade

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New York, NYAs Toyota continues to reel from its recall troubles, lawsuits have already begun to emerge.

CNN Money was reporting this morning that more than 30 lawsuits have been filed against the Japanese automaker for the pedals alone. There will likely be more lawsuits to come, says Craig Hutson, senior investment grade analyst at Gimme Credit, a bond research service firm. Consumers are concerned about recent recalls with regard to anti-lock brakes in the 2010 Prius and some Lexus models. There have also been reports of steering problems with the Corolla.

Over and above that is the growing concern over deficits with the Toyota electronic throttle-body control systems that electronically link the accelerator pedal to the engine. Various experts in the field of electromagnetic interference suspect a problem with the electronics as opposed to a mechanical problem with the pedals.

The company also faces at least one class action suit involving problems with the brakes in 2010 models of the Prius and other hybrid vehicles, which were included in the recall Toyota announced on Tuesday.

Safety experts estimate that there have been 19 fatalities resulting from defective gas pedals. Some speculate that the number will climb as investigators dig deeper into cold cases—accidents where no cause was ever found.

The recalls alone are expected to cost Toyota about $2 billion. Lawsuits, both in terms of payouts and the legal costs, could dwarf that figure. "Lawyers are chomping 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."

Credit rating agency Moody's cited the litigation risks when it warned on Tuesday that it might downgrade Toyota's credit ratings.

Lawsuits could stem from death or injury, emotional duress, inconvenience and even lost resale value. Toyota products have always enjoyed a healthy resale value, prompting many owners to choose products that will retain their value for future sale. The latest Toyota recall and quality debacle could put a serious dent in resale value.

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