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Takata chairman stays out of sight as air bag crisis imperils dynasty

Bloomberg

Takata Corp. Chairman Shigehisa Takada’s failure to come forward and address an air bag crisis ensnaring the world’s biggest automakers risks shaking investor confidence in the 81-year-old company’s prospects.

Takada plans to skip Thursday’s analyst briefing in Tokyo and send in his place Chief Financial Officer Yoichiro Nomura, who also appeared at the Tokyo Stock Exchange last week to bow in apology for the company.

The last public showing by the head of the maker of air bags linked to four deaths was in June, at an annual shareholders’ meeting closed to the media. Since then, his only statement was issued seven days after the U.S. urged immediate fixes to cars recalled because of Takata products.

Takada’s absence threatens to prolong investor concerns over the company’s ability to overcome the air bag crisis, which has knocked 63 percent off its market value this year.

By contrast, General Motors Co. Chief Executive Officer Mary Barra has spoken publicly throughout the year in response to scrutiny over its handling of ignition-switch recalls linked to multiple deaths.

“It’s not good for the CEO to keep silent in a critical situation like this,” said Kazuyuki Terao, chief investment officer of Allianz Global Investors Japan Co., which sold all of the Takata shares it held earlier this year. “Takata’s share price may fall further if investors started to think they better sell while it’s still possible.”

The company has declined multiple requests for interviews with Takada, its chairman and chief executive officer, as well as for President Stefan Stocker. In response to the most recent interview request, spokeswoman Kikko Takai said the chairman was “extremely busy.”

Takada, 48, couldn’t be reached at his registered address, where a three-story house is under construction. He earned ¥278 million last year in compensation and dividends, more than the ¥152 million made by Takanobu Ito, president and CEO of Honda Motor Co., Takata’s biggest customer.

Ito told reporters this week that Honda is trying its best to identify the reasons behind the air bag accidents and that the related deaths and injuries were “heart-wrenching.”

“If people have died and it appears that the defects were your responsibility, obviously there is an immediate need for the board and management to publicly react,” said Nicholas Benes, head of the Board Director Training Institute of Japan. “The board has to jump on it immediately, to make sure the firm has a plan, takes action and continuously reports to the world the steps they’re taking.”

Akiko Takada, Shigehisa’s mother, wasn’t available at the address registered under her name. She served on the company’s board from June 1991 to June 2007 and now heads its charitable foundation.

They are both board members of TKJ, which holds about 52 percent of Takata. They also own individual stakes totaling about 5 percent, according to data compiled by Bloomberg.

Takata faces calls by U.S. senators Edward Markey and Richard Blumenthal for the Justice Department to open a criminal investigation following a Nov. 7 report by The New York Times. Two unidentified former employees told the newspaper that engineers found air bag flaws in testing conducted in 2004 before being ordered to dispose of the components.

The report also spurred a complaint in Los Angeles federal court this week that’s now one of about a dozen class-action lawsuits filed against the company since last month.

Takata disputed The New York Times report, calling the former employees’ allegations “fundamentally inaccurate.” The company said it “takes very seriously the accusations made” in the report and is “cooperating and participating fully with the government investigation now under way.”

Takata’s response wasn’t enough to spare the company from being punished by the markets. Its shares are trading at a five-year low. The yield premium investors demand to hold the company’s seven-year bond sold in March rose to a record high of 400 basis points on Monday, up 335 basis points in the last month, according to data compiled by Bloomberg.

SMBC Nikko Securities Inc. Tuesday suspended its neutral rating on Takata’s stock, saying it has “become impossible” to “ascribe a rationally based target price and investment rating to the stock in this volatile environment.”

Shigehisa, the son of former Chairman Juichiro and Akiko, graduated from Keio University, where he studied science and technology before joining the family firm in 1988. He was named director in 2004 and president and chief operating officer in June 2007.

Takezo Takada, Shigehisa’s grandfather, started the company as a textile business in 1933, four years before Kiichiro Toyoda founded the company that eventually became Toyota Motor Corp.

The two companies trod similar paths five decades later. Both set up their first U.S. joint ventures in 1984, with Takata assembling seat belts in Michigan and Toyota building cars with GM in California.

Juichiro, who also went by Jim, took the company public in 2006 and pushed expansion in overseas markets before his death in February 2011. Today, more than 80 percent of Takata’s sales are outside Japan.

The younger Shigehisa was described as quieter and reserved compared with his more forceful father by three members of Japan’s auto supplier industry, who asked not to be identified to preserve their relationships with Takata.

Shigehisa said in his Oct. 27 statement that the company will continue to cooperate fully with any inquiries or requests from regulators, and work with automakers to carry out their recalls. He hasn’t made any public comments since.

The U.S. National Highway Traffic Safety Administration has given Takata until Dec. 1 to answer questions under oath and turn over materials detailing how it has handled air bag problems going back to 2000. The devices have been linked to four deaths and the recall of at least 7.8 million vehicles by 10 automakers in the U.S. since last year.

“What’s at stake is not a quality problem, it’s how you cooperate with the authorities in the U.S., how promptly you disclose your information,” said Yusuke Ueda, a Tokyo-based credit analyst at Bank of America Merrill Lynch. “Takata hasn’t understood this well.”