Nissan Motor Co (7201.T: Quote, Profile, Research) , Japan's third-largest auto maker, said on Thursday it would recall 2.55 million cars worldwide at an estimated cost of 15 to 16 billion yen ($138-148 million) due to an engine defect.
The recall applies to 1.02 million cars in Japan spanning 25 models, making it the second-biggest ever by an auto maker in Japan, a Transport Ministry official said.

The biggest was also by Nissan, involving about 1.05 million cars in May 1996.

A Nissan spokeswoman said the cost of the recall had been factored into profit forecasts for the business year to next March. Some of the cost will be shared by parts makers, she said.

Earlier this month, Nissan said it would keep its full-year operating profit forecast unchanged at 820 billion yen ($7.58 billion), up 11 percent from last year.

Shares of Nissan, owned 44.4 percent by France's Renault (RENA.PA: Quote, Profile, Research) , fell on the recall news. The stock closed down 0.73 percent to 1,221 yen after touching a high of 1,273 yen.

Some analysts had expressed concern about possible quality issues at Nissan, which has been expanding its product line-up and output volumes at break-neck speed over the past few years.

The defect was found inside a sensor in the engine that could lead to a short-circuit and stop the engine from working. There have been no reports of accidents caused by the problem.

The recall affects many popular cars manufactured between 1998 and May 2003, including the Sunny, March, Cube, Primera, Presage, X-Trail, Skyline and Fairlady Z, as well as two cars built for Subaru-maker Fuji Heavy Industries (7270.T: Quote, Profile, Research) and Mazda Motor Corp (7261.T: Quote, Profile, Research) on an OEM (original equipment manufacturer) basis.

Of the 1.53 million units to be recalled overseas, 700,000 are in North America and 460,000 in Europe.