Honda's escalating airbag crisis frays half-century ties

TOKYO/DETROIT (Bloomberg) -- Honda Motor Co. signaled a growing rift in its more than 50-year relationship with airbag maker Takata Corp., as the automaker struggles to contain a crisis that’s killed five motorists in its cars.

Honda on Wednesday turned to Sweden's Autoliv Inc. to help supply replacement parts for recalled vehicles and is negotiating with Japan’s Daicel Corp. on securing more of the components. The carmaker also volunteered to a nationwide recall to replace driver-side safety devices, hours after Takata snubbed a deadline set by the U.S. auto regulator to take similar action.

Any estrangement in Takata’s ties to Honda are significant because the supplier may need carmakers to shoulder some of the costs from recalling more than 13 million vehicles worldwide. In addition to being its largest customer, Honda owns a 1.2 percent stake in Takata and built the first Japanese car in 1963 offering its seat belts as a standard feature.

“For a safety company, it’s all about trust and integrity,” Dave Sullivan, an analyst at AutoPacific Inc., said in a phone interview. “Right now, Takata doesn’t have any.”

Carmakers are likely to seek alternative suppliers within the next 12 to 18 months, and Takata will lose contracts to supply parts for future models without discounting its products, Sullivan said.

To avoid “sudden death” of Takata as a result of regional recalls getting expanded nationwide, carmakers could consider sharing the cost burden, Shintaro Niimura, a credit analyst at Nomura, wrote in a Nov. 26 report. 

Honda question 

“The debate will likely be tinged with the question of whether Honda will support Takata or not,” said Niimura.

Honda is also joining Toyota Motor Corp. and other carmakers in calling for independent, industrywide testing of Takata airbag inflators to supplement the supplier’s own investigation. The National Highway Traffic Safety Administration has said the components can malfunction if exposed to moisture, leading the devices to rupture and break apart metal pieces that can strike passengers.

NHTSA also is probing Takata's choice of propellants used to activate the airbags.

Autoliv will deliver replacement inflators to Honda within about six months, the maker of airbags, seat belts and radar systems said in a statement. The company said it will add capacity to make the replacement parts in existing plants.

Nationwide recall 

Honda will expand its U.S. recall of driver’s-side inflators to a nationwide repair campaign from one limited to regions with high absolute humidity, Rick Schostek, executive vice president of the carmaker’s North American unit, said Wednesday in Washington.

More than 8 million cars U.S. cars with Takata airbags, mostly from high-humidity states and territories. The Tokyo-based supplier has declined NHTSA’s demand that it declare a nationwide recall, citing a shortage of replacement parts and data that it says supports regional actions.

“Takata made a decision to not go national with its recall and Honda had to step into the void,” Scott Upham, president of Valient Market Research, said in an interview. “They had to fall on the sword to protect their customers and avoid any bad press. Takata avoided doing that because of the cost.”

Daicel and Autoliv may control more than half of the market for inflators by 2020 as Takata’s share shrinks, Upham said. 

‘Bitter rivals’ 

Takata “can’t even produce enough to meet the regional recall,” he said. “It must be killing them to have to talk to their competitors about bailing them out. Those are pretty bitter rivals there.”

Autoliv, the biggest maker of inflators, may boost its share of the global market for the component to 28 percent by 2020 from 25 percent, while Daicel’s share could jump to 24 percent from 16 percent, according to Valient’s projections.

Daicel, which already supplies some inflators to Takata’s airbag systems, is targeting 30 percent market share for the component by 2020, Masahiko Hirokawa, a company spokesman, has said.

Autoliv CEO Jan Carlson said in a statement that the company will do its best to support customers, with “quality as our first priority.”