Toyota is considering a recall involving headlights on the Toyota Prius. The HID bulbs on some Prius models can cost upwards of $1,000 to replace when they fail, prompting a slew of complaints by affected Prius owners as well as a lawsuit that may become a class-action suit.

The NHTSA has begun a preliminary investigation after receiving more than 300 complaints regarding the issue. Toyota claims that it is cooperating with the NHTSA but has refused to comment on the possibility of a recall.

The Toyota iQ is on track for North America- a relatively fast track at that. First introduced as a concept car in 2007, the iQ became available in Japan in 2008 and in Europe in January, 2009. A version of the iQ made its American debut as a Scion-badged concept car at the New York Auto Show in April.

Rumor has it that the iQ will become the first in a series that will include the Scion iQ as well as a hybrid version. It is also rumored that the iQ platform will also be the basis for the next generation Toyota Yaris.

New strategies from Toyota tend to support (at least some) of these rumors. Toyota has announced new versions of the iQ that will soon be available in Japan and a joint venture with Aston Martin that will use the iQ platform.

Soon available in Japan will be new versions of the iQ. These will be limited edition, customized versions in much the same way that Scion markets its vehicles in America. Among the versions that will be available as early as November will be a sporty version. Following that are plans for a version tailored to younger consumers and one that will be marketed toward women.

Meanwhile, a joint venture with Aston Martin will produce an iQ-based car called the Cygnet. Aston Martin is based in the UK but will market the Cygnet throughout Europe.

Though Toyota has yet to confirm any rumors, it clearly has shown commitment to the iQ platform and a willingness to move the iQ quickly from concept to production.

Don’t expect an “economy” car like the Kia Forte with a low sticker price. General consensus among car makers is that such vehicles sell poorly due to poor perception of quality and have a low profit margin- a combination that spells disaster. Rather, expect any version of the iQ to be more moderately priced but trendy and “green”.

NUMMI (New United Motor Manufacturing, Inc.) is a joint venture between Toyota and GM that was established in Fremont, California in 1984. It was the first automotive joint venture plant in the US. It also represents Toyota’s first American production facility. NUMMI currently employs roughly 5,500 people with 60% of its production for Toyota. It currently produces the Corolla, the Tacoma and the Pontiac Vibe (which is based on the Toyota Matrix).

GM has announced that it will discontinue its partnership with Toyota. Ongoing negotiations between the two companies ended with GMs decision, as part of its bankruptcy, to withdraw from the 25-year-old venture. Neither company has disclosed the financial terms of GM’s decision to turn the plant over to Toyota.

Effective this August, GM will discontinue production of the Pontiac Vibe as it abandons the Pontiac nameplate. With that, the joint venture between GM and Toyota will come to a close. The fate of the production facility is very unsettled at this point. Toyota had hoped to reach an agreement with GM and has declined to comment about any plans that it has for NUMMI.

Toyota has a rich history at the NUMMI facility, and it ranks with other Toyota plants as among the most productive automotive facilities in North America. It is a massive plant, spanning the same size as nearly 90 football fields. There had been talks until recently of a joint venture whereby a version of the Toyota Prius would be manufactured there as a GM product. Workers at NUMMI hope that Toyota will amend those plans to build the Prius at the plant.

It is, however, the only unionized Toyota plant in North America. It is also twice the average age of other Toyota facilities. Given the current economic situation- which has already strained Toyota’s bottom line- it is a difficult choice for Toyota.

As yet, there has been no public discussion of a third party entering into a joint venture at NUMMI, picking up where GM left off. Perhaps another company would like to manufacture a version of the Prius under their name. Only time will tell. In the meantime, nearly 5,500 employees will continue to work with an uncertain future.

The news was devastating to some. As part of its bankruptcy, Chrysler plans to eliminate nearly 800 dealerships. GM has also announced plans to eliminate 2,600 dealerships (with 300,000 employees) this year and another 1,000 dealerships by the end of next year.

With Chrysler’s bankruptcy protection (and the expectation of a bankruptcy filing at GM), the affected dealerships can expect to be, “left out in the cold,” according to one industry insider. “There won’t be a buyback of cars or parts. The dealers will lose their affiliation but will be stuck with all of their inventory.”

Toyota is said to be actively approaching many former Chrysler and GM dealerships. Of particular interest to Toyota are those dealerships that already have a Toyota franchise in place.

What deals will be made and what impact this will ultimately have is unclear. Toyota’s strength is the relative scarcity of dealerships. Toyota dealerships are more spread out than domestic counterparts, so there is less internal competition.

As Toyota looks to convert some of the old Chrysler and GM dealers, it will have to take care not to over-saturate any existing markets. Since most of Chrysler and GM’s cuts are in urban and suburban markets, Scion may prove to be the biggest beneficiary of the franchise change.

The wild card in all this is that old inventory. Dealers are supposed to try to sell it to surviving franchises. This works fine for companies like AutoNation, Inc which owns other franchises, but smaller dealerships will be left trying to sell entire inventories in a market that is already weak. These dealers can expect to get only a fraction of what they paid for their inventories.

Their alternative is to take a smaller loss by selling their products off at rock-bottom prices. This could cause a sudden, severe deflation of car prices across the board that would affect not just Chrysler and GM, but Toyota as well.

It’s a bleak prospect for sales and economic recovery that would likely knock the auto industry back for years- something that everybody will be looking to avoid.

However it turns out, the ripple effect from these bankruptcies will echo throughout the industry for years to come.

According to the Detroit News, Toyota’s incoming President Akio Toyoda intends to replace most of the company’s top management in an attempt to return the company to profit. As a result of the economic downturn and lagging auto sales, Toyota is reporting its first operating loss in over 70 years.

Toyoda, the 52-year-old grandson of founder Kiichiro Toyoda, will succeed Katsuaki Watanabe in June. Watanabe will become vice chairman.

Toyoda will be replacing the company’s other four executive vice presidents and many of the 19 senior managing directors, according to unnamed sources. He will also curtail Toyota’s expansion strategy, which had allowed the company to top GM in worldwide sales last year.

Chairman Fujio Cho has stated that Honorary Chairman Shoichiro Toyoda, Akio’s 83-year-old father, and Adviser Hiroshi Okuda, 76, may step down from Toyota’s board; Toyota spokesman Paul Nolasco declined to comment.

Toyoda must try to reverse the 15% sales drop in the US while finding ways to utilize Toyota’s excess production capacity in the meantime. Sales this year may reach their lowest levels in nearly thirty years after dropping last year for the first time in a decade.

Japan’s economy has officially slipped into recession for the first time since 2001. Japan, the world’s second-largest economy, joins the 15-nation Euro Zone (the nations in the European Union that use the Euro as their exclusive currency) in official recession.

Economists had expected Japan to officially break its slump this quarter, averting a recession. Instead, the continuing global financial crisis has lead to dramatic declines in exports of electronics and automobiles. As a result, exporters are slashing sales, profit and spending projections through at least March of 2009.

The economy has made for a stronger yen, which further limits trade. Masanobu Ishikawa, general manager of foreign exchange at Japan’s largest currency broker Tokyo Forex & Ueda Harlow, Ltd, has said, “We’re not likely to see any economic good news for some time.”

This has caused Toyota (as well as Honda and Nissan) to begin shedding jobs after forecasting that 2009 net profit would be down 56%. Toyota expects to sell 673,000 fewer vehicles this year (538,000 in North America alone). The brunt of the cuts will be in South America, where many contract workers have already begun losing jobs.