Things are looking up for the global auto industry, one of the worst hit sectors during the financial crisis.

Once-suffering Toyota is set to report better-than-expected profits this quarter and expand operations, other Asian automakers are also on track to make money, and auto sales are growing in most markets.

The impact of regulatory reforms signed into law last week is already being seen in asset-backed securities, as Ford Motor Credit pulled an ABS deal last week after the major rating agencies confirmed that they will not allow their ratings to be used in bond prospectuses for such securities—thanks to changing liability under the regulatory overhaul.

The regulations set new liabilities for ratings agencies that consent to allow their ratings to be used in public ABS offering prospectuses. Under the new law, ratings firms are subject to “expert liability”—which means that they will have the same liability and legal risks as accountants and others specialists that are involved in bond sales, as Marine Cole reported in her blog last week.

In the wake of an announcement this week by the US National Highway Traffic Safety Administration that it is opening a new investigation into the timeliness of disclosure of steering defects in some US models, carmaker Toyota  has announced a somewhat surprising return to profitability for the year ending in March – beating its own forecasts from February.

The carmaker saw net profits rise to Y209.5 billion ($2.3 billion) in fiscal 2009 – up from a net loss of Y436.9 billion the previous year. In its February forecast, the firm estimated profits of Y80 billion.

Are Toyota's problems with its gas pedals a blow to the long-vaunted Japanese car makers and a victory for the American car makers?  Some pundits seem to think so.

In fact, several press reports are now suggesting Toyota had been sacrificing quality for quantity for a number of years. (Full disclosure: Several days before the recall was announced, I purchased a Toyota Avalon. Great timing, huh?)