Amid a deepening quality crisis, Toyota Motor Corp. notified the National Highway Traffic Safety Administration late yesterday that it is adding 1.1 million vehicles to its November campaign to fix 4.3 million vehicles with floor mats that can jam the accelerator pedal.

The latest action expands the recall to include the 2008-2010 Highlander SUVs, 2009-2010 Corolla compact cars and Matrix and Venza crossover vehicles. The campaign also involves the 2009-2010 Pontiac Vibe crossover, which shares a platform with the Corolla and Matrix. Late last year NHTSA confirmed five fatalities linked to the problem.

The 2009-2010 Corolla, Highlander and Matrix also were parts of a separate recall last week of 2.3 million Toyota vehicles with accelerator pedals that could stick in the open position. The company has halted sales and production of the eight models involved until it determines a remedy for the problem. NHTSA says it strongly urged Toyota to take those actions.

Both recalls involve vehicles that may be difficult for drivers to slow or stop if the throttle pedal sticks or jams. There are more than 1.7 million vehicles that are involved in both recalls, and the total number of vehicles being recalled now exceeds 5 million.

In response to the earlier recall, Toyota said in late November it would replace floor mats, shorten the pedals and remove a layer of foam under the carpeting to increase the space between the pedal and the floor. In some models, dealers also will reprogram an electronic control unit to add a brake override.

Toyota said yesterday it has been working with Elkhart, Ind.-based supplier CTS Corp. on a revised design to remedy accelerator pedal problems. The automaker says the revamped pedals are now in full production at CTS, apparently to be used in new vehicles. The company says it also is working with CTS on ways to modify existing pedals.

Toyota Motor Corp.’s reputation is almost certain to suffer from its widening U.S. recalls to fix problems with accelerator pedals that can make its vehicles difficult to slow or stop, analysts say.

They note that the campaigns are especially damaging because Toyota built its image as a maker of reliable, high-quality cars and trucks. The company acknowledges it doesn’t yet know how to fix the problem that prompted it to recall 2.3 million vehicles last week—an admission that generates plenty of uncertainty among the company’s customers, analysts point out.

Some observers say the company’s freeze on sales and production of eight models affected by the recall could cause car buyers to avoid Toyota showrooms altogether. IHS Global Insight estimates Toyota will lose 20,000 vehicle sales for every week that sales of the eight models are suspended. The recall’s effects are spreading beyond individual owners of Toyota vehicles. Rental car companies Avis, Budget, Enterprise and Hertz say they are pulling affected Toyota vehicles from their fleets.

CEO Akio Toyoda, who wants Toyota Motor Corp. to cultivate a stronger connection with Ford Motor Co., met with Ford CEO Alan Mulally in San Francisco last fall to discuss possible cooperation, according to today’s Wall Street Journal.

The newspaper, which cites an unidentified senior Toyota executive, says the two CEOs reached no specific agreement but identified environmental initiatives as a potential area of collaboration and agreed to meet again. The Journal quotes the source as saying that two companies might jointly develop and produce hybrid and plug-in electric vehicles. Toyota and Ford already use similar technology in their gasoline-electric hybrids.

The newspaper says Toyoda is seeking an American ally as “insurance” against a possible future political backlash. The Journal says Toyoda’s mission became more urgent after General Motors Co. announced in June it was abandoning its California-based New United Motor Manufacturing Inc. joint venture with Toyota.

Mulally has long expressed admiration for Toyota’s product development and manufacturing prowess. Shortly after he took charge at Ford in September 2008, Mulally flew to Japan for a collegial meeting with then-Chairman Fujio Cho and other Toyota executives.

The U.S. Federal Reserve left its key overnight bank lending rate unchanged in the range of zero to 0.25%, where it has been for 13 months, and reiterates that rates will remain low for an “extended period.”

But this time the vote wasn’t unanimous, according to the Fed’s statement after yesterday’s meeting. Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, contends the economy is strong enough to allow the central bank to ease its commitment to hold down rates for the long term. Hoenig is among the policymakers who fear that keeping rates low for too long could fuel inflation. Economists say his objections could signal that the Fed will decide to hike interest rates later this year.

The Fed upgraded its economic outlook to say the recovery will be “moderate for a time” rather than “weak.” But it adds that high unemployment and tight credit will continue to constrain growth.

Central bankers still intend by March 31 to wind down the liquidity initiatives launched last year to stabilize financial markets. Among the programs being terminated is one that helps auto lenders raise capital by selling securities backed by auto loans.

General Motors and Ford are launching new incentives aimed squarely at owners of Toyota, Lexus and Scion vehicles to take advantage of their safety worries in the wake of a series of large Toyota recalls for jammed or sticking accelerator pedals.

The deals apply to trade-ins of any Toyota brand or model, not just those affected by the recent recalls.

GM will offer interest-free loans for as long as 60 months or $1,000 cash through the end of February to buyers of most GM vehicles who trade in a Toyota vehicle. The company says its incentives are a response to a barrage of calls to its dealers from worried Toyota owners.

Ford will offer a $1,000 cash rebate to customers who trade in vehicles from Lexus, Scion or Toyota. Ford also plans to offer the same deal to owners of Acura and Honda vehicles.

Chrysler, Honda, Hyundai and Nissan say they are not planning any marketing campaigns aimed expressly at Toyota’s customers. A Hyundai spokesman tells Bloomberg News the company doesn’t want to “jump on this thing like a vampire.”

General Motors Co. has halted sales of the few remaining Pontiac Vibe crossover vehicles still on dealer lots after Toyota Motor Co. suspended sales of its Matrix, which shares most of its components with the Vibe, Dow Jones Newswires reports.

Last week Toyota recalled 2009-2010 Matrix models because of sticky throttle pedals. Earlier this week it told dealers to stop selling those vehicles until it finds a remedy to the problem. Yesterday Toyota added the 2009-2010 Matrix and Vibe to an earlier recall to fix a problem that allows floor mats to jam the throttle pedals.

GM tells the news service that only 26 Vibes remain on U.S. dealer lots. The company is winding down the Pontiac brand and stopped making the Vibe in August at its California joint venture assembly plant with Toyota. GM withdrew from the joint venture in June, and Toyota plans to shutter the operation in March.

Motors Liquidation Co., which consists of the unwanted assets that General Motors Co. left behind in Chapter 11, has filed a lawsuit in federal bankruptcy court against BMW AG, alleging the automaker has breached an agreement to buy GM-made transmissions through 2015.

Motors Liquidation wants the court to force BMW to continue buying the gearboxes or pay unspecified damages. The German company says GM breached the contract by failing to incorporate new technology BMW wanted.

Motors Liquidation is trying to sell the plant in Strasbourg, France, where the transmissions are built. The factory’s value would be higher if BMW continues as a customer.

Crude oil futures declined by $1.04 per barrel yesterday on the New York Mercantile Exchange to close at $73.67, down $9.50 from their 15-month high three weeks ago.

Analysts cite a stronger dollar and signs of sluggish energy demand. Although U.S. inventories of commercially available crude oil declined 1% last week, supplies of distillates and gasoline increased—the latter to a 22-month high, according to the U.S. Energy Information Administration. The agency says oil demand in the past two weeks was down 2% from a year earlier.

U.S. retail gasoline prices have eased to an average of $2.70 per gallon nationwide, down 6 cents from two weeks ago, according to the AAA Daily Fuel Gauge Report. Prices are 86 cents higher than a year ago.

Ford Motor Co. is expected to sign a definitive agreement by mid-February to sell its Volvo Cars unit to China’s Zhejiang Geely Holding Group Co. for an estimated $2 billion, according to news reports.

Reuters adds that Geely has filed plans with Chinese regulators to erect a new assembly plant near Beijing to produce as many as 300,000 Volvos per year by an unspecified date. The Chinese output would double Volvo’s global capacity.

The sale agreement would still require the approval of the Chinese government. Ford has said it aims to reach a binding deal in the first quarter and close the sale by mid-year. It is still unclear how Geely plans to finance the acquisition. Reuters reports that Geely might set up a separate company, which would be 51% owned by foreign investors, to buy Volvo.

Protesters say they will stage rallies at Fiat dealerships in 30 Italian cities today to protest the company’s plans to idle five Italian assembly plants for two weeks because of a sharp decline in sales.

Political activists and Fiat’s unions also object to the company’s plan to permanently close a plant in Sicily. They want Italians to sell their Fiat shares and boycott all of the company’s vehicles, including the Alfa Romeo, Fiat and Lancia cars, commercial trucks and farm and construction equipment. Protesters also urge a boycott of banks, insurance companies and publishing companies in which Fiat has an interest.

Some analysts suggest Fiat’s cutbacks are intended to spur the Italian government to extend scrappage incentives that have boosted auto demand.

But the public protests illustrate how difficult it can be for automakers in Europe to reduce capacity, even for a few weeks. Fiat CEO Sergio Marchionne has complained that political pressures have deterred European carmakers from eliminating most of the industry’s 30% overcapacity in the region, despite the sharp auto downturn.

Tom Pyden, a former General Motors Co. public relations executive, will join Detroit-based Ilitch Holdings Inc. on Monday as vice president of corporate communications.

He succeeds Karen Cullen, another former GM communications manager, who joined Ilitch Holdings in 2005. Cullen will become a senior advisor working on charity and community service programs sponsored by the company.

Pyden stepped down on Jan. 1 as vice president of communications for GM’s North American unit after 26 years at the company. Privately held Ilitch Holdings includes the Little Caesars Pizza chain, the Detroit Red Wings hockey team, the Detroit Tigers baseball team and several entertainment companies.