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Takata's air bag response puts firm in NHTSA's cross hairs

by Keiichiro Otsuka


With no breakthrough in sight regarding Takata Corp.’s faulty air bags and its handling of extensive recalls, U.S. transportation authorities are ratcheting up pressure on the embattled Japanese auto-parts supplier.

The world’s No. 2 producer of air bags is widely seen as having been less than forthcoming in responding to the National Highway Traffic Safety Administration’s probe into the root cause of the defective air bags and in taking responsibility for the problem.

Transportation Secretary Anthony Foxx has even characterized the company as a “bad actor.” In February, he called on Congress to pass legislation to provide tools and resources “needed to change the culture of safety for bad actors like Takata.”

Takata “may have stepped on the tiger’s tail,” an executive at a Japanese automaker said about the U.S. rhetoric and actions being used to pressure Takata into taking a more proactive stance.

Takata had 56 production bases in 20 countries and a global workforce of more than 43,000 as of March 2014. Its defective air bags, built mainly in the 2000s at its U.S. and Mexican factories, were recently found to spray shrapnel-like fragments into passengers when activated due to the rupturing of gas canisters linked to the air bags’ explosive propellant. The defect has been linked to the deaths of at least six people in the U.S. and Malaysia.

Takata’s air bags have been the subject of a series of recalls since 2008, but the company has not been able to provide enough replacement kits for the vehicles, which have surpassed 26 million worldwide.

Following the death of a Texas driver in January, three U.S. senators including Bill Nelson of Florida, wrote to NHTSA Administrator Mark Rosekind.

“We trust that you agree it is imperative that these dangerous and deadly air bags be taken off the roads and repaired as quickly as possible,” the senators wrote.

One automotive industry journalist even said that Takata is a step behind and doing less than it should.

Takata’s approach to the defect contrasts with Toyota Motor Corp.’s handling of an “unintended acceleration” problem that led to massive recalls, mostly in the U.S., in 2009 and 2010.

After the problem emerged, Toyota President Akio Toyoda flew in from Japan to testify before a U.S. congressional hearing and offered his apologies in an attempt to address growing public anxiety.

In contrast, Takata Chairman and CEO Shigehisa Takada has not been seen in public since his brief appearance at a shareholders’ meeting in June. Bloomberg News questioned his apparent lack of accountability and described his behavior as “duck and cover.”

The NHTSA, a unit of the Department of Transportation, issued a letter in November asking Takata to expand its air bag recall to cover the entire country, rather than specific regions deemed extra humid.

Takata responded to the call with a letter from Mike Rains, director of product safety at TK Holdings Inc., Takata’s U.S. subsidiary. Rains noted that Takata was given “only two working days to respond, given the intervening Thanksgiving holiday.”

Rains went as far as to dispute the request from the NHTSA, saying “Takata firmly believes that the currently available information and data do not support a nationwide recall.”

Takata did send an official to two Congressional hearings in Washington late last year, but it was a senior vice president in charge of quality assurance at its U.S. subsidiary. At the hearings, the official dodged questions about whether a nationwide recall should be supported.

While Takata barked at the NHTSA, the automakers affected by the defect, including Honda Motor Co. and Mazda Motors Corp., decided to go nationwide with their recalls.

“You can’t do business in the U.S. if you make an enemy of the NHTSA,” one automaker executive said.

Frustrated with Takata’s apparent unwillingness to cooperate, the NHTSA has grown even more determined to close in on the firm. Since Feb. 20, Takata has been slapped with a daily fine of $14,000 for its failure to cooperate with requests in the agency’s investigation.

Describing Takata’s attitude as “unacceptable” and saying the fine is not enough, Transportation Secretary Foxx called on Congress to legislate improved safety measures.

Takata responded vigorously, expressing surprise and disappointment at the NHTSA’s move.

“We strongly disagree with the characterization that we have not been fully cooperative,” it said.

On Feb. 25, the NHTSA announced another action, ordering Takata to preserve all inflators removed from recalled vehicles as evidence for the agency’s investigation and private litigation cases.

In a letter dated March 3, NHTSA chief Rosekind wrote to Sen. Nelson that the safety agency is considering invoking its authority to increase the supply of replacement parts by requiring more manufacturers to produce them, Reuters reported.

The NHTSA estimates that faulty Takata air bags are installed in more than 17 million vehicles in the United States and that they have been replaced in fewer than 2 million vehicles.

The report of the letter came just after Takata announced on March 2 that it was roughly doubling the production capacity of replacement kits to 900,000 sets per month by September.

In December, Takata announced that it has appointed two former transportation secretaries — Rodney Slater and Norman Mineta — as special counsels to ensure the company’s response to the air bag problem is “decisive and appropriate” enough to regain public trust.

But this move may prove ineffective.

“Takata may have thought appointing former transportation secretaries would help resolve its problem but it doesn’t look like such a result is being attained at all,” an auto industry official said.

Takata is financially reeling from growing costs linked to the recalls. For the year ending March 2015, the company is anticipating a consolidated net loss of ¥31 billion ($258 million).

“It probably won’t be able to continue standing on its own feet and could be forced to merge with another auto parts maker,” another auto industry official said.

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