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When it rains, it pours. Things just keep getting worse and worse for Toyota. On Friday Toyota Motor Corp. (NYSE:TM) recalled 600,000 Sienna minivans due to rusting spare tire cables. This is just the latest in a series of recalls for the Japanese automaker.

In 2009 Toyota recalled millions of Toyota Camry and Lexus ES350 models for floor mat and brake problems. This year Toyota has recalled millions more cars for accelerator pedal problems and brake glitches. Investigators are looking into steering problems with the Corolla. Now Toyota has stopped selling its Lexus GX460 SUV because of safety concerns. The following vehicles have been affected by recalls:

2005-2010 Avalon
2007-2010 Camry
2009-2010 Corolla
2008-2010 Highlander
2009-2010 Matrix
2004-2010 Prius
2009-2010 RAV4
2008-2010 Sequoia
2005-2010 Tacoma
2007-2010 Tundra
2009-2010 VENZA

The recalls will cost Toyota $2 billion dollars according to the BBC. While $2 billion dollars is a substantial hit, the biggest hit is to Toyota’s image. Toyota had a reputation for quality in North America and that image has been tarnished for years to come. Toyota can continue to offer incentives but as long as the company’s name remains in the headlines, profitability will suffer. Toyota’s problems represent a great opportunity for Ford and General Motors to gain domestic market share. According to the Detroit Free Press, Ford’s market share increased nearly 3% over the past 3 month. This is the highest increase in 23 years. The current market share for the three largest manufacturers in the US is General Motors with 18.7%, Ford 16.4%, and Toyota 15.2%.

If I had to buy shares of one auto manufacturer today, it would be Ford (NYSE:F). I am normally not a big fan of stocks that Wall Street loves but Ford’s future prospects look good. Ford has some impressive new automobiles and the company’s financial position is improving. The stock is trading at a 9.5 multiple with analysts looking for earnings of $1.41 per share for 2011. The low estimate for 2011 is 99 cents and the highest is $2.07. Sales are expected to rise 35% over the next 5 years and shares appear cheap on a PEG basis. The one negative for Ford is that the company still has a huge debt burden unlike General Motors.

Compare that with Toyota’s financials. Toyota is trading at nearly $80 per share with an average estimated EPS of $1.14 per share for 2011. That puts a multiple over 70 on the stock. How confident are analysts in Toyota’s earnings? Not very. The low end estimate is a loss of 53 cents and the highest estimate is $2.80 per share. Sales growth is projected at 62% over the next five years. Toyota can only discount its automobiles so much. They have been sacrificing profit margin in order to sell vehicles. Eventually if the company’s reputation for reliability and safety keeps taking a hit, buyers will look elsewhere no matter how deeply discounted the vehicles are for now.

Disclosure: I do not own shares in Ford or Toyota.

Source: Toyota Woes Help Ford