Toyota joins Honda in dumping Takata inflators; firm’s future in doubt

Akio Toyoda Friday announced that Toyota would no longer use Takata airbag inflators in its vehicles. He made his comments to reporters at Tokyo news conference that covered other topics.

It has been a particularly bad for besieged airbag manufacturer Takata. In the space of five days, Takata saw Honda, Mazda and Toyota stop using its products while other manufacturers considered doing the same. And, Takata saw its stock take a drubbing, losing 39 percent of its value in three days, with a 6.2 percent loss yesterday. After the close of trading, Takata posted an 8.66 billion yen ($71 million) loss in the second quarter. The company also trashed its full-year profit estimate from 20 billion yen to five billion.

The airbag manufacturer faced a near perfect storm of setbacks that has left many in the world of financial analysis wondering whether it will be able to survive in the long run. The stock beating aside, the biggest shocks to Takata were the actions of Honda and Toyota and Mazda and the potential actions of Subaru and Mitsubishi. Subaru and Mitsubishi were said to be considering actions similar to Honda and Toyota. Published reports also said Nissan might also stop using Takata’s airbag components. However, the automaker denied those reports.

According to Automotive News, the actions by the automakers were unprecedented. As the trade paper points out, relationships in the Japanese auto industry tend to be measured over many decades and the repudiations by not only Honda but also by Toyota are completely out of character. These actions are dealing heavy blows to Takata, which had banked on the continuing support of automakers to weather the storm of criticism by regulators that has been raining down upon it for more than a year.

The fact is that it seemed as if Takata’s fortunes were on the upswing as it had withstood the criticism. However, Honda’s action torpedoes those hopes. And, a quote by Toyota’s Akio Toyoda at a press briefing yesterday helped to further down Takata’s hopes, as well. Toyoda adamantly told reporters in Tokyo that “the inflator using ammonium nitrate produced by Takata will not be adopted by Toyota.” He concluded by saying that Toyota is concerned about “above anything else is the safety and peace of mind of customers.”

Honda and Toyota have the biggest stake in the ongoing recall of cars with faulty Takata airbags. The two automakers have the largest number of vehicles involved. Worldwide figures suggest that nearly 40 million vehicles are affected by defective Takata inflator parts. In the U.S., the numbers have been put at about 20 million vehicles with 23 million inflators that need replacement. To date, the Takata airbag scandal has been linked directly to eight deaths and more than 100 injuries. The problem seems to revolve around the propellant used, ammonium nitrate. As it deteriorates, the blast pressure created on deployment shatters inflator housings, sending shrapnel scything through passenger compartments with, sometimes, deadly effect.

In related actions,

· Takata has hired SMBC Nikko Securities to draft a lifesaving plan.

· Analysts question whether Takata can survive at all when its major customers are bailing out.

· Takata was told to phase out ammonium-based inflators by 2018.

· Autoliv, Daicel and TRW Automotive will supply Honda, traditionally Takata’s largest customer.

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