Mazda snubs Takata; supplier's survival in doubt

TOKYO (Reuters) -- Analysts are openly questioning the survival chances of Takata Corp. as more automakers consider no longer using its airbag inflators at the center of a recall crisis.

A day after Takata's biggest customer, Honda Motor, said it would stop fitting its new cars with the supplier's airbag inflators, Mazda said it would drop Takata inflators containing ammonium nitrate from its new cars.

Mitsubishi Motors and Subaru-maker Fuji Heavy Industries also said they were thinking about switching away from Takata's inflators.

Airbag parts contributed 38 percent of Takata's total sales last year. The company reports its first-half results on Friday.

U.S. regulators say Takata's inflators use a chemical propellant they suspect causes the airbag to explode with too much force, spraying metal shards into the car. The inflators have been linked to eight deaths, all in Honda cars, and have led to the recall of more than 40 million cars worldwide.

"We will not use Takata airbag inflators which contain ammonium nitrate in our new cars," Akira Marumoto, Mazda's executive vice president, told reporters today.

Earlier, Fuji Heavy CEO Yasuyuki Yoshinaga said: "We are thinking of not using Takata's inflators for future cars." He said Subaru may also look elsewhere for the inflators it needs to fix cars under recall as it was taking Takata too long to supply them.

The founding Takada family owns about 60 percent of Takata, while Honda holds 1.2 percent and its history of buying parts from the supplier dates back more than 50 years.

Survival plans

"We are considering some plans to survive, but it is not at the stage I can talk about yet," CEO Shigehisa Takada, 49, told reporters Wednesday.

Honda said it will be able to source all replacement inflators from suppliers other than Takata "in the foreseeable future."

"We have become aware of evidence that suggests that Takata misrepresented and manipulated test data for certain airbag inflators," the carmaker said. "Honda expects its suppliers to act with integrity at all times and we are deeply troubled by this apparent behavior by one of our suppliers."

Toyota, the carmaker with the second-most vehicles involved in the Takata recalls, will "respond promptly to new developments," spokesman Itsuki Kurosu said. Toyota said that it is continuing to investigate Takata's airbag inflators and remained committed to using "higher quality" components.

Nissan said it would defer to U.S. regulators on actions related to Takata.

Takata said Tuesday it would pay a $70 million fine imposed by the U.S. National Highway Traffic Safety Administration (NHTSA) in installments, and phase out -- as ordered by NHTSA -- the use of potentially volatile ammonium nitrate as a propellant in its airbag inflators. 

The fine is equivalent to less than five days' worth of sales. The fines would grow another $130 million if Takata fails to comply with a U.S. consent order.

After Honda announced it will discontinue using Takata's inflators, Takata's shares tumbled as much as 20 percent in Tokyo trading and Takada acknowledged a risk to the company's existence.

By cutting off Takata, Honda overshadowed a settlement that gave Takada, grandson of the company's founder, at least three more years to determine the root cause behind the airbag malfunctions. In accusing Takata of misdeeds, Honda also put it under more pressure to shoulder the bill for recalling 19 million vehicles in the U.S.

Other suppliers

Honda has already turned to suppliers Daicel Corp., Autoliv and TRW Automotive to provide the carmaker with replacement airbag inflators.

"There is very little chance for Takata to survive," said Amir Anvarzadeh, Singapore-based global head of Japan equity sales at BGC Capital Partners. "It's different from cheating devices. It's a safety equipment maker killing people and lying about their issue."

The company's shares extended their slump after Takada bowed and apologized in public for the second time in four months. Asked whether the company will survive, Takada said "there's risk."

Takata will not be able to get through this crisis if its banks cut the company off, said Ken Miyao, an analyst at Carnorama in Tokyo. To avoid that, the supplier needs to make sure it doesn't lose any more customers.

Honda's allegation that Takata manipulated data may change the nature of its relationships with customers, Shintaro Niimura, a credit analyst at Nomura Holdings in Tokyo, said. "If it's true, that may change the whole situation," Niimura said. "It may affect carmakers' attitudes that have been supportive and negotiations on sharing recall cost would also be affected."

Takata may try to survive the crisis by exiting the manufacturing of airbag inflators altogether and focus on assembling the module instead, said Yusuke Ueda, a credit analyst at Bank of America Merrill Lynch. It would be difficult for Takata to find a buyer even if it wants to sell its airbag inflator business, he said.

NHTSA evidence

In its agreement reached with the U.S. National Highway Traffic Safety Administration, Takata said it failed to notify the agency of a defect within five days in six recalls and didn't explain documents it gave to the regulator under two orders. NHTSA also uncovered evidence Takata had provided "selective, incomplete or inaccurate information" to the agency and customers. The company agreed to a $70 million civil penalty and said fines could reach as much as $200 million if it fails to meet obligations over a five-year period.

While Takata omitted information from its reporting to automakers, Hiroshi Shimizu, a senior vice president, told reporters Wednesday he didn't think the company manipulated test data. The company issued a statement hours later clarifying the statement by Shimizu, a member of the company's board of directors, saying it didn't dispute the claim.

At the Takata briefing on Wednesday, Takada was visibly frustrated when asked why the company had taken so long to stop using ammonium nitrate, which it has identified as one of the contributing causes to the malfunction.

"We believe in the safety of ammonium nitrate and want to prove it," Takada said. "But given that there's too much focus on this issue, and given the concerns of carmakers, we made the business decision to deal with those concerns."

Bloomberg contributed to this report