Japanese auto parts maker Takata is facing the biggest test in its 80-year history amid lawsuits, a possible criminal probe, and accusations of “deception and obfuscation” over an airbag defect linked to several US deaths.
The company’s shares have plunged as a pair of US senators call for a criminal probe, while the New York Times reported that the world’s second-biggest airbag maker covered up the fatal defect for years — investigators are probing key client Honda over similar allegations.
The problems at Tokyo-based Takata have also laid bare the challenges of a global supply chain. Nearly a dozen automotive clients including Honda, Toyota and General Motors are recalling millions of cars over fears their airbags could improperly inflate and rupture, potentially firing deadly shrapnel at the occupants.
Former Takata employees told the Times that secret tests were conducted a full decade ago to investigate the defect, but executives ordered the destruction of data that exposed design flaws. The allegations have set off a string of lawsuits over four possible airbag-related deaths, and hundreds of injuries.
“Instead of safely deploying airbags to protect vehicle occupants, the defective Takata inflators…explode, sending metal and plastic shrapnel into the vehicle cabin,” said US law firm Hagens Berman, which is involved in a class-action lawsuit against Takata and Honda. “Rather than take the issue head-on and immediately do everything in their power to prevent further injury and loss of life, Takata and Honda have engaged in a ten-year pattern of deception and obfuscation.”
Attention has focused on a Takata plant in Mexico amid suspicions the defect may be linked to a chemical propellant used to inflate the airbags which can more easily rupture in areas with high humidity. Police reportedly investigated at least one driver death in the US as a murder due to woman’s grisly injuries, until their focus switched to the vehicle’s airbag.
The National Highway Traffic Safety Administration (NHTSA), the US auto safety regulator, has expanded its “urgent” warning to owners of cars with affected airbags to take them to dealers to fix the problem. “Fines from US regulatory organisations are not known at present, but could be significant depending on the outcome of the current investigations,”
US-based auto analyst Scott Upham said in an e-mail to AFP, as he pointed to Toyota’s deal this year to pay $1.2 billion to settle US criminal charges that it tried to cover up deadly vehicle accelerator defects. Upham also warned of a criminal prosecution of Takata executives if the “allegations of testing data deletion, destroying of test samples and not reporting these issues to the US government are indeed true“.
Its brand will be “tarnished in the eyes of Japanese automakers but more impact will be felt from American and European automakers“, he added. Founded in 1933 as a textile company, Takata evolved into an automotive parts giant that started selling airbags in the 1980s and now has dozens of plants and offices in 20 countries, including the United States,China and Mexico.
The airbag division accounts for about 40% of its total revenue, which amounted to 556.99 billion yen ($4.88 billion) last fiscal year. Takata has warned over a bigger-than-expected annual loss, but has kept largely silent on the defect that has plunged the firm into crisis. Executive vice President Yoichiro Nomura told a Tokyo press briefing last week that the firm “sincerely apologises” for the defect.
But when asked about its seemingly flat-footed public relations response, Nomura said: “We want to make announcements appropriately.” Major automakers have shied away from discussing their future relationship with Takata, but a quick switch is unlikely given the Japanese giant’s foothold in the sector.
Still, parts sourcing for the 2019-2020 model years is happening right now, and a Toyota executive last month said the world’s biggest automaker wants to replace the defective part “with something of better quality“.
“The earnings outlook for Takata looks increasingly unclear owing to the widening recall of the company’s airbags, which could lead to a fall in (its) market share in the longer term,” Nomura Securities analyst Yohei Ohama said in a report. Takata’s Tokyo-listed shares have lost more than half their value since the start of the year.
Hans Greimel, Asia editor for the Automotive News, said Takata’s clients — many of whom have issued huge recalls in recent years over unrelated defects — have so far weathered the storm by blaming the airbag supplier.
But “the story is not ended yet, and there are still lots of chapters yet to write,” he added.
“If it becomes very clear that Honda was slow to react or hid information, that could impact their image definitely.”
Following are some key events leading to the recall of several million cars fitted with potentially defective airbags made by Japanese firm Takata:
Nov 4 — Honda Motor recalls 4,000 Accords and Civics (2001 models) globally as Takata airbag inflators may produce excessive internal pressure causing them to rupture and spray metal fragments in the car.
May 27 — Oklahoma teen Ashley Parham dies when the air bag in her 2001 Honda Accord explodes, shooting metal fragments into her neck. Honda and Takata deny fault and settle for an undisclosed sum.
July 29 — Honda recalls 510,000 Civics, Accords and Acura 3.2 TL cars (2001-02 models) globally for potentially defective Takata airbags.
Dec 24 — Gurjit Rathore is killed in Virginia when the air bag in a 2001 Honda Accord explodes after a minor accident, severing arteries in her neck, court documents show. Her family sues Honda and Takata for more than $75 million in April 2011, claiming they knew of the air bag problems as early as 2004. Honda and Takata settle in January 2013 for $3 million, according to court documents.
Feb 9 — Honda recalls 437,000 Acura cars and other vehicles (2001-03 models) globally, expanding earlier recalls, saying there were two processes used to prepare air bag inflator propellant and one “does not provide us with the same confidence.”
April 27 — Honda recalls 896,000 Honda and Acura 2001-03 cars in order to find defective Takata air bag inflators installed as replacement parts.
Dec 1 — Honda again expands recalls. Globally, it says 304,000 are recalled as a bad inflator may have been installed at the factory, and 613,000 are recalled to find defective inflators installed as replacement parts.
April 11 — Toyota Motor, Honda, Nissan Motor and Mazda Motor recall 3.4 million vehicles globally due to possibly defective Takata air bags.
April 18 — Takata says to book extraordinary loss of $307 million for year to March 2013 for recall-related costs.
May 7 — BMW recalls 220,000 vehicles globally, raising the overall recall for the latest Takata-related issue to over 3.6 million.
May 10 — Takata posts record $212.5 million annual net loss, and names Swiss national Stefan Stocker as president, the first foreigner in the post.
Sept 3 — Third death linked to Takata air bags. Devin Xu dies in a 2002 Acura TL sedan in a parking lot accident near Los Angeles from “apparent facial trauma due to foreign object inside air bag,” according to coroner’s report.
June 11 — Toyota expands prior recall to 2.27 million vehicles globally; adding 650,000 previously not recalled in Japan, and 1.62 million overseas for a second time. NHTSA opens probe that goes beyond manufacturing glitches Takata and Honda previously identified. NHTSA is examining whether driving in high humidity regions contributes to the risk of Takata air bag explosions. Takata says inflators in the recall were supplied to Honda, Toyota, BMW, Chrysler, Ford, Mazda and Nissan. It says there is nothing to indicate any safety defects in these inflators.
June 23 — Honda, Nissan and Mazda recall 2.95 million vehicles, expanding the April 2013 recall, bringing the total recall to about 10.5 million vehicles over five years. Later, Honda, Toyota, Nissan, Mazda, BMW, Chrysler and Ford say they are recalling more vehicles in some US high humidity regions at NHTSA’s request to replace Takata air bag inflators.
June 26 — Takata CEO apologises to shareholders at AGM.
June 30 — Takata says some potentially defective inflators were also shipped to Subaru and Mitsubishi Motors.
July 16 — BMW recalls about 1.6 million cars worldwide to replace Takata air bags, going beyond the regional US recall.
July 18 — Takata says to book special loss of about 45 billion yen ($440 million) in April-June for recalls.
Oct 2 — Fourth death linked to Takata air bags. Orlando woman Hien Thi Tran dies four days after her 2001 Honda Accord is in an accident in which the air bag explodes, shooting out shrapnel, according to the police report.
Oct 20 — Toyota recalls 247,000 vehicles in the US for Takata air bag problems.
Oct 21 — Takata shares drop 23% in Tokyo.
Oct 22 — NHTSA expands the total number of US vehicles recalled involving Takata air bags to 7.8 million over the past 18 months.
Oct 27 — A first case seeking class-action status is filed in Florida, claiming Takata and automakers, including Honda and Toyota, concealed crucial information on potentially defective air bags.
Oct 30 — NHTSA orders Takata to provide documents and answer questions under oath in air bag probe. On Nov 5, NHTSA orders Honda to do the same.
Nov 6 — Takata warns of a bigger full-year loss, and pays no interim dividend for first time since 2006.
Nov 7 — New York Times reports Takata ordered technicians to destroy results of tests on some air bags after finding cracks in inflators. Democratic lawmakers call for criminal probe into Takata.
Nov 10 — Takata shares drop 17% to 5-1/2 year low.