Two additional deaths in Malaysia were linked to ruptured air bag inflators made by Takata Corp., further damaging the reputation of the Japanese supplier as it works to comply with a U.S. order to expand a record recall.
Two fatal Honda car crashes in Malaysia, one on April 16 and the other just last Monday, involved ruptured driver-side air bag inflators made by Takata, according to a statement by Honda Motor Co.
The air bags had not been replaced though the two vehicles were included in recalls announced by the authorities, the automaker said. The U.S. National Highway Traffic Safety Administration (NHTSA) on Wednesday ordered Takata to replace as many as 40 million additional air bags in the U.S., more than doubling what has been announced.
At least 13 deaths are now linked to the malfunctioning devices, underscoring the scale of the crisis confronting President Shigehisa Takada, who has seen his family company’s market value plunge by 75 percent over the past year. The expansion of recalls in the U.S. also adds to the costs that the supplier must bear even as it seeks a financial lifeline to survive.
“This should be a wake-up call for Malaysia” to ensure cars are taken off the roads until they are repaired, said Jochen Siebert, managing director of JSC (Shanghai) Automotive Consulting Co. “Once they do this or similar actions, it will of course give Honda a bad name and in the end one more reason for any carmaker to disassociate themselves from Takata.”
NHTSA’s order is in addition to the 28.8 million inflators Takata had previously called back in the U.S., affecting vehicles made by 12 different manufacturers including Honda Motor Co., Toyota Motor Corp. and Fiat Chrysler Automobiles NV. With the latest development, as many as 69 million inflators will be recalled.
Seventeen manufacturers are now covered, including Tesla Motors Inc., Jaguar Land Rover Automotive PLC and Fisker Automotive Inc.
Credit Suisse Group AG has estimated that a recall of 50 million vehicles will cost the company about ¥375 billion ($3.5 billion), more than the value of its net assets. The number may increase to 75 million if it is limited to air bags without drying agents, according to Credit Suisse in a March 30 note.
Takata put the tab for a comprehensive callback — involving 287.5 million air-bag inflators — at about ¥2.7 trillion, according to a person familiar with the matter back in March.
A researcher hired by a coalition of automakers said in February that moisture seeping into Takata’s inflators was determined to be the reason the air bags may rupture. Using a drying agent, or desiccant, in the propellant prevents moisture from destabilizing the compound.
In an emailed statement, Tokyo-based Takata agreed to act on NHTSA’s request because of “shared interest toward future safety and restoring public confidence.” The company said it was not aware of any ruptures involving the latest recall of air bags.
On the Malaysian deaths, Takata said it is working in “close collaboration with Honda to determine the facts and circumstances surrounding the situation.”
A spokesman for Malaysia’s Ministry of Transport did not immediately return calls to his mobile phone.
In 2014, a driver who was 8½ months pregnant died in Malaysia after a collision set off the air bag, which ruptured and fired an inch-wide (2.5-cm-wide) shard of metal into her neck. That was the first known Takata air bag-related death outside the U.S.
The latest recalls are just accelerating a longer-term decline in demand for air bags given the advance in assisted driving technology like collision avoidance and automatic braking, according to Yale Zhang, a managing director at Autoforesight Shanghai Co. With automakers and technology companies including Alphabet Inc.’s Google working on fully self-driving cars, “passive safety systems like air bags are becoming a commodity and will eventually be phased out with the cars of the future,” he said.
Even so, it has been a fall from grace for Takata, which started in 1933 as part of the textile weaving industry and was among companies that produced parachutes for the Imperial Japanese Army during World War II. It later rose to prominence as one of the world’s largest makers of seat belts.
The company entered the air-bag business in the 1980s at the behest of Honda Motor Co. That decade also marked Takata’s first forays outside of Japan.
The company set up its first plant in Asia outside of Japan in South Korea in 1980, and began production in the U.K. in 1988. Takata set up its first joint venture in the U.S. in 1984.
The late Juichiro Takada, father of the current president, 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.
Takata this week increased provisions for its air-bag recalls, booking a combined ¥20.1 billion in charges, excluding costs related to recalls that are still under investigation, according to a statement on Monday. The company is scheduled to announce full-year results on Wednesday.
Takata is seeking sponsors that will replenish its capital and allow it to emerge as a new company, a person familiar with the matter said last month. Takata has estimated cash and equivalents may drop 24 percent to ¥49.7 billion by the end of March 2017 if recalls continue at the current pace, the person said. The company has a market value of ¥31 billion.
“The expansion of the Takata recall is no doubt a severe blow to the company and its future prospects,” said Scott Upham, founder of Valient Market Research, who has followed the air bag industry for more than two decades. “It is our forecast that Takata will ultimately survive this recall as a smaller supplier of seatbelts and electronics. Takata will likely need to exit the inflator business and possibly go through a bankruptcy phase in order to survive.”
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