Takata sets aside $189 million in air bag recall costs

Tokyo / Bloomberg

Takata Corp. raised provisions for its air bag recalls that involve more than a dozen auto manufacturers, after denying reports that the biggest safety crisis in the industry’s history will expand further.
The auto parts supplier will book a combined 20.1 billion yen ($189 million) in charges, 16.6 billion of which was decided after reviewing air bag recall costs, according to a statement on Monday. The remaining 3.5 billion yen charge is related to settlements with consumers injured by the devices.
Takata plunged earlier by the most in a month, after the Nikkei newspaper reported that US regulators plan to call for expanded recalls. The shares fell 9.2 percent to 373 yen at the close in Tokyo, dropping its market capitalization to about 31 billion yen.
The National Highway Traffic Safety Administration has told carmakers that recalls will widen to all vehicles with air bags lacking a moisture-absorbing desiccant that keeps the devices from deteriorating. There are more than 100 million such vehicles worldwide, the newspaper said.
No decision has been made on expanding US recalls and Takata is in talks with NHTSA. The air-bag maker has lost more than half of its value this year.
Takata inflators that can deploy too forcefully, rupture and spray plastic and metal shards at vehicle occupants have already prompted more than a dozen auto manufacturers to recall at least 60 million air bags worldwide. The defective components are linked to the deaths of 10 motorists in the US and a pregnant woman in Malaysia in 2014. A fatal accident involving a Honda Civic driver in India last year also is under investigation.
A researcher hired by a coalition of automakers said in February that moisture seeping into Takata’s inflators was determined to be the reason the air bags may rupture. Several other investigations are still under way.
Cash Outlook
The latest charges for Takata don’t include costs related to recalls that are still under investigation. The company said it’d already booked 2.6 billion yen in settlements during the nine-month period ended in December. The air-bag supplier is scheduled to report earnings for the fiscal year ended in March on May 11.
Takata has estimated cash and equivalents may drop 24 percent to 49.7 billion yen by the end of March 2017 if recalls continue at the current pace. Takata is seeking sponsors that would replenish its capital and allow it to emerge as a new company.