19 LINKEDINMORE

Washington – — Takata Corp. shares fell the most in more than a year in Tokyo trading after Honda Motor Co. said it’s aware of evidence suggesting the supplier manipulated air bag inflator test data and will no longer use the components in new models under development.

Takata dropped as much as 20 percent, the biggest intraday decline since October 2014, while the benchmark Topix index gained 1.7 percent as of 12:49 p.m. in Tokyo trading. Honda, which is Takata’s biggest customer, said it was “deeply troubled” by the supplier’s behavior after Takata agreed to pay a $70 million penalty and face as much as $130 million more in fines to its U.S. regulator. President Shigehisa Takada said “there’s risk” when asked whether the company will survive during a press conference Wednesday.

While Takata omitted information from its reporting to automakers, it didn’t manipulate test data, Hiroshi Shimizu, a senior vice president and member of the company’s board of directors, told reporters Wednesday. The company will stop using ammonium nitrate as the chemical propellant to inflate its air bags and switch to a compound called guanidine nitrate, Takada said.

The National Highway Traffic Safety Administration imposed a record-setting $200 million settlement on Takata Corp. Tuesday over the Japanese air bag manufacturer’s handling of a recall of 19.2 million vehicles linked to at least eight deaths and 99 injuries.

The settlement includes a $70 million fine and $130 million in deferred penalties. It comes after government investigators found Takata had misled regulators since 2009 about the safety of air bag inflators that can rupture and send steel fragments flying. It is the largest settlement ever imposed by NHTSA, topping the $105 million settlement that Fiat Chrysler Automobiles NV agreed to in July. Both had the same $70 million fine.

The agency also named an independent monitor due to oversee the auto supplier.

Takata — which has its North American headquarters in Auburn Hills — faces an ongoing criminal investigation led by prosecutors in Detroit and could face massive fines like those paid by General Motors Co. and Toyota Motor Corp.

“These failures put millions of Americans at risk,” Transportation Secretary Anthony Foxx said Tuesday. “This has been a mess, and today USDOT (United States Department of Transportation) is stepping in to clean up the mess.”

NHTSA said it is taking formal control of the record-setting recalls of nearly 20 million vehicles with defective Takata air bags by 12 automakers. The agency doesn’t expect all vehicles to be repaired until the end of 2017, but says that’s at least two years faster than without government control. The monitor will oversee the massive recalls.

Takata chairman and CEO Shigehisa Takada said the settlement is an “important step forward for Takata that will enable us to focus on rebuilding the trust of automakers, regulators and the driving public. Today’s announcement also marks a pivot point for Takata by setting out an orderly transition to the next generation of inflators.”

Under the deal, Takata will phase out the use of a compound in air bag inflators — ammonium nitrate — that has come under criticism and that the vast majority of its competitors have stopped using. Takata has also agreed to eventually replace nearly all air bag inflators that use the chemical, an expansion that could add millions more vehicles to the recall tally, Foxx said.

Honda, which made the cars in which all of the suspected deaths and most of the injuries occurred, said Tuesday it would stop using Takata as a supplier for air bags. .

Takata has agreed to make sweeping changes in how it does business and has agreed to fire an undisclosed number of employees in the wake of the investigation.

The air bag supplier agreed to a five-year consent decree that could be extended by another year. It must hire a chief safety assurance and accountability officer, disclose who was fired and complete a detailed internal report on what went wrong. It must hold regular meetings with NHTSA and make improvements to internal whistle-blower reporting.

“We are holding Takata responsible for its failures,” NHTSA Administrator Mark Rosekind said, noting that Takata for months denied problems with most of the air bags.

NHTSA and Takata sparred for months, with NHTSA officials threatening to go to court until Takata agreed in May to declare as many as 33.8 million air bag inflators defective. It’s believed to be the largest auto recall in U.S. history. NHTSA said it believes the recalls now cover about 20 million vehicles and 24 million inflators.

“This company is trying to turn the corner,” Foxx said, noting the company’s acceptance of responsibility after years of misleading automakers. But he said the “proof is in the pudding” to ensure that Takata follows up the admissions with actions.

Priorities for repairs

Most of the exploding air bags have been in older vehicles exposed to high humidity for long periods. It is believed those conditions cause the propellant to explode with too much force. A coalition of automakers has been working for months to learn the root case.

NHTSA wants vehicles from 2008 or older that have spent significant time in high-humidity areas repaired first. For those vehicles, automakers must have a sufficient supply of replacement parts by March 2016. Target dates are staggered for other vehicles through the end of 2019.

The agency said last month that nearly 30 percent of recalled air bags in high-humidity areas have been repaired. The national recall completion rate is 22.5 percent. NHTSA is especially urging owners with older vehicles that have been kept in humid areas like Miami or the Gulf Coast to get repairs made immediately.

Takata has come under scrutiny and faces lawsuits over whether it addressed quality issues as it rapidly expanded air bag production. It has admitted to problems at plants in Mexico and Washington state. NHTSA’s independent monitor will be able to oversee problems.

“I hope the auto industry will take notice of the damage this kind of crisis has done — damage to corporate reputations, to corporate bottom lines, as well as to innocent Americans who have been injured and killed by these inflators,” Foxx said.

Takata has agreed under the NHTSA settlement not to enter into any new contracts after Oct. 31 with automakers to build air bag inflators with ammonium nitrate. It has agreed to a phaseout schedule to halt production by 2018. NHTSA could seek a faster phaseout if it finds evidence to support that.

Sen. Bill Nelson, D-Fla., questioned if NHTSA is allowing Takata to sell inflators with the suspect chemical for too long: “I remain concerned that Takata will be able to sell some inflators with ammonium nitrate until the end of 2018.”

Risk assessment

NHTSA said Takata has done testing to mimic air bag deployments on 115,000 inflators that have been returned after recalls. Takata is “now doing between 4,000 and 5,000 tests each week. Out of those 115,000 total tests, approximately 450 inflators have ruptured,” NHTSA said.

“Something that’s been seen in those tests, but is not yet understood, is that driver inflators and some types of passenger inflators rupture at a rate of about one to two ruptures for every 1,000 ballistics tests — but other passenger types are rupturing at rates of 10 to 20 ruptures for every 1,000 ballistics tests, roughly 10 times more often,” said NHTSA’s Scott Yon.

NHTSA asked all 12 automakers that have recalled vehicles to do a risk assessment of the vehicles needing recalls.

Sens. John Thune, R-S.D., and Bill Nelson, D-Fla., the chairman and ranking member of the Senate Commerce Committee, asked Takata to explain if the company’s new air bag inflators pose a serious safety risk. The lawmakers’ letter comes after last week’s recall of about 400 GM vehicles for potentially defective side air bags and a June incident involving the rupture of a side air bag inflator in a 2015 Volkswagen Tiguan.

“We seek to gain a better understanding as to whether these incidents are connected to the defects associated with the previous recalls, as well as whether they reflect issues related to the newer ammonium-nitrate based inflators,” the senators wrote, demanding answers by Nov. 13.

DShepardson@detroitnews.com

Bloomberg News contributed.

19 LINKEDINMORE
Read or Share this story: http://detne.ws/1NoVJ37