TOKYO — Key Safety Systems catapults from being nearly unknown in Japan to becoming a major player overnight, thanks to its $1.6 billion bankruptcy buyout of tainted airbag maker Takata Corp.
But there are big challenges in Key Safety's takeover, which puts it deeply into a Japanese customer base for the first time.
Key Safety will leap from an 8 percent global airbag market share to approximately a 25 percent share with Takata's book of business, according to IHS Markit estimates. But the American company must carefully maneuver through some tricky areas, including differences in size, human resources, culture and image.
- Size: Key Safety is a sizable company but much smaller than Takata. Key Safety has 13,000 employees worldwide, compared with Takata's 46,000. Key Safety's annual revenue of $1.8 billion is dwarfed by Takata's ¥662.5 trillion ($5.9 billion). The difference in scale introduces a new level of management complexity for Key Safety that would strain the expertise of any company, warns Takaki Nakanishi, an independent automotive analyst in Tokyo. Key Safety's Chinese parent company, Ningbo Joyson Electronic Corp., has rapidly expanded through splurging on acquisitions. But that only heightens the intricacies for a company that lacks a long track record.
- Human resources: Before Takata's bankruptcy filing last week, the ailing company was beset by brain drain as engineers and other staffers abandoned the sinking ship. Takata CEO Shigehisa Takada addressed the exodus directly as one reason the company couldn't go on. Takata's move to seek court protection has been described by Japanese media as the biggest failure of a Japanese manufacturer since World War II. Key Safety says it will keep Takata's Japanese operations intact and plans no job cuts. But a lot of the damage may have occurred. Key Safety may be stepping into a partly hollowed-out company with massive morale problems.
- Culture: Japanese automakers are renowned for their rigorous vetting of suppliers. Even though Takata had undeniable systematic weaknesses, it also had a history of working intimately with every major automaker in Japan. And relationships count for Japan Inc. Key Safety, by contrast, doesn't even have business with Takata's largest customer, Honda Motor Co. Automakers here say they will continue to do business with Takata's spinoffs when it makes sense. But Key Safety can't take for granted that it will keep all the business it has acquired. It will have to prove it can deliver products as well as — if not better than — Takata to ensure a continuing flow of orders. And running any Japanese company from an American headquarters could be an exercise rife with culture-clash land mines.
- Image: In trumpeting the deal, Takata and Key Safety took pains to portray it as a rescue by an American company. The official announcement mentions the parent company Ningbo Joyson only once, and doesn't mention its Chinese roots. Yet the China connection is not lost on the industry in Japan, which is sensitive to issues of nationality and more cautious with China. Japan's Nikkei business daily headlined one story, "Little Chinese auto parts maker is behind the huge Takata takeover." Japanese automakers may be more inclined to shift to another Japanese airbag producer, such as Toyoda Gosei, or to a more well-established international player such as Autoliv. Then again, Key Safety at least hasn't been slapped with criminal fines for defrauding customers. Says analyst Nakanishi: "It's better than working with Takata, which had no hope."