Takata stocks tank during massive recall

Keith Laing, Detroit News Washington Bureau

Washington — Stocks for Japanese air bag manufacturer Takata Corp.are taking a beating amid reports of a looming bankruptcy filing that could potentially upend the largest recall in U.S. history.

Stocks for the beleaguered company closed down another 19.8 percent Tuesday on the Toyko Stock Exchange to 324 Japanese yen, or about $2.90, per share. The stock price is down nearly 32 percent over the past week, and 62 percent for the year.

A bankruptcy filing for the company is imminent, according to observers who have watched the air bag maker closely since federal regulators put it in the cross-hairs for making faulty air bag inflators that are prone to rupture in humid climates. The National Highway Traffic Safety Administration has recalled nearly 70 million of Takata’s air bag inflators, placing the company in dire financial straits as it scrambles to repair the faulty parts.

“This is the largest, most expensive recall in the history of the automotive industry,” said Karl Brauer, executive publisher for Autotrader and Kelley Blue Book. “Takata’s bankruptcy was almost a foregone conclusion, but the need to replace tens of millions of air bags remains. It’s likely that process will continue throughout Takata’s bankruptcy proceedings and will take years to complete.”

Brauer added that the cost of the Japanese air bag manufacture filing for bankruptcy “will reach far beyond Takata, weighing on the financials of nearly 20 automakers.

“It’s a textbook case of what happens when a small number of suppliers service the entire global auto industry,” he said. “In theory that system saves everyone money, but when a problem like this flares, there’s no escaping the impact.”

A U.S.-based spokesman for Takata declined to comment about the company’s potential bankruptcy filing.

Flying shrapnel from exploding Takata air bag inflators have led to a recall of nearly 70 million inflators. The faulty air bag inflators have been linked to 11 deaths and more than 180 injuries in the United States.

The recall is being conducted in phases that target the most vulnerable cars that are located in humid climates. Michigan is among the lowest-priority states in the recall.

It is the largest automotive callback in U.S. history. Approximately 46 million Takata air bags in 29 million cars already are subject to recall, with another 20 million to 25 million additional air bags set to be recalled with the next couple of years. Takata has been ordered to recall all of the faulty air bags by the end of 2019.

Federal regulators have required Takata to plead guilty to wire fraud and pay $975 million in restitution and $25 million in fines for the faulty air bags.

The National Highway Traffic Safety Administration says the recall of defective air bag inflators made by Takata will encompass 34 vehicle brands and about 42 million cars in the U.S when it is completed. The agency says more than 16 million Takata air bags have been repaired as of May 26.

Michelle Krebs, executive analyst for Autotrader, said automakers will still be on the hook for fixing the cars that have faulty air bag inflators, even if Takata goes under as expected.

“Ultimately the responsibility for the Takata air bag recalls rests with the automakers who must figure out how to replace the flawed air bags,” she said. “Presumably, Takata will continue manufacturing air bags throughout the bankruptcy proceedings. Longer-term, the question is whether Takata, with a new owner, can rebuild trust with automakers to build future business. That will be a daunting task. A plus for Takata is the fact that the number of air-bag suppliers has dwindled to a mere few.”

Krebs said the Chinese company Key Safety Systems has emerged as the likely buyer of Takata after it emerges from bankruptcy proceedings. Key Safety Systems did not immediately respond to a request for comment Tuesday.

Krebs said any company that emerges with control of Takata will face a long road to restoring the company’s image among automakers, and will be held responsible for hefty fines that have been incurred.

“Somebody has got to pay them,” she said of Takata’s fines. “They’re not going to go away.” She added: “The challenge for the new Takata is to regain the trust of automakers. I know Honda lost a lot of faith and moved some business elsewhere.”

Krebs said the revamped Takata will likely benefit from the fact that there are few other air bag manufacturers that can compare to its volume of production.

Lawmakers in Congress say Takata should be held responsible for fixing its faulty air bags, no matter what happens with its likely bankruptcy filing.

“The bankruptcy process must ensure that the defective Takata air bags continue to be replaced and injured drivers are effectively compensated,” U.S. Sen. Bill Nelson, the top Democrat on the Senate Commerce, Science and Transportation Committee, said in a statement. “Anything less would amount to letting the company off the hook.”

Rosemary Shahan, president of the Sacramento, Calif.-based Consumers for Auto Reliability and Safety group, added: “I’m concerned that if Takata goes bankrupt, that could slow down production of replacement air bags and increase risks among consumers who are often stuck driving unsafe recalled cars, while they wait for months for repairs.

“Some manufacturers, like Honda, have been providing loaner vehicles, but others, such as Ford, generally refuse requests for loaner cars — leaving their customers at risk of death or devastating injuries,” she said.


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Twitter: @Keith_Laing