The O2 sensor is seeing a lean air/fuel ratio from the hole in the catalytic converter. So, it react by putting more gas than needed into engine. This creates a rich air/fuel ratio which is not what you want to start a cold vehicle. There is a valve called The Fast Idle Thermo Valve FIT, which senses coolant temperature and lets in air through ports to lean out the mixture at the throttle body. It then closes ports as the coolant temperature rises.
Your engine is having trouble burning all the excess fuel and your MPG is probably a lot worse than it should be.
Just plugging the hole with some exhaust weld epoxy from an auto parts store would be a good way to see if this is the source of the problem. However, it is not the way to fix it. I would replace the catalytic converter as it is probably deteriorated inside and will only coninue to give you trouble if you patch it. It can also clog up and cause rough idle and no start situations.
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Wednesday, October 5th, 2011 AT 11:44 PM