Takata forecasts record $235 million loss on airbag recall

TOKYO (Bloomberg) -- Takata Corp., the Japanese maker of faulty airbags causing millions of recalled vehicles this year, forecast a record annual loss on the callbacks.

The net loss will probably be 24 billion yen ($235 million), the company said today in a statement. That compares with its previous forecast for 16 billion yen profit. It booked a 45 billion yen one-time charge in the first fiscal quarter on the recalls.

The U.S. National Highway Traffic Safety Administration and Takata are investigating whether high humidity played a role in airbag ruptures reported mostly in Florida, Puerto Rico and other jurisdictions with above-average moisture. Airbag ruptures were among the faults with Takata products that caused carmakers to call back 6.47 million units globally this year, based on estimates in a July 8 report by Shintaro Niimura, an analyst at Nomura Holdings Inc.

“They are going to survive,” Scott Upham, president of Valient Automotive Market Research in Rochester, N.Y., said in a phone interview. “They will have to go through a period where they are contrite and showing they’re doing everything to make things right.”

Nissan and Honda, which announced recalls last month of about 3 million vehicles globally, are planning to recoup the costs from Takata, the carmakers’ executives said last month when reporting first-quarter earnings.

Customers waver 

Honda Executive Vice President Tetsuo Iwamura said last month the carmaker is considering whether to continue using Takata airbags.

“A recall that has ballooned to this big will definitely leave a bad impression for carmakers,” said Masahiro Akita, an analyst with Credit Suisse Group AG. “It may not be easy for them to cut all the ties with a company that holds 20 percent of global share, but it’s also hard to imagine there’s going to be no impact on future business.”

This year’s recall followed a 3 million car callback by Toyota, Honda and Nissan last year, as Takata found it didn’t include all vehicles affected by the defective airbag inflators.

The company posted a net loss of 21.1 billion yen in the year ended March 2013, when it booked 30 billion yen in recall-related expenses.

After the recall last year, Takata replaced its president Shigehisa Takada, grandson of the company’s founder, with Swiss national Stefan Stocker, the first foreigner in the post. Takada, 48, became the company’s chairman and CEO.

Widening scrutiny 

Scrutiny of potential safety flaws in the auto industry has been increasing, with automakers in the first six months of 2014 already recalling more vehicles in the U.S. than in any other full year on record. General Motors Co., which accounts for about two-thirds of that total, is under investigation for taking years to recall millions of vehicles for faulty ignition switches.

Takata isn’t unfamiliar with large recalls. Several automakers called back almost 9 million vehicles in 1995 to replace faulty seat belts made by the parts maker -- a record for the auto industry at the time.

Honda, the biggest customer of Takata, has called back a total of 6 million vehicles for problems with Takata airbags in nine recalls since 2008, based on figures from the carmaker. Two people died in 2009 in accidents related to the defect, it said.

Separately, Takata has been embroiled in the ongoing anti-trust investigation by the U.S. Department of Justice. The company paid a $71 million fine last year and five employees have faced prosecution. 

Takata ranks No.44 on the Automotive News list of the top 100 global suppliers with worldwide sales to automakers of $5 billion during its 2013 fiscal year.

Automotive News contributed to this report.



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