Takata customers to remain with supplier for now despite company’s troubles

Article by Christian Andrei, on October 29, 2014

While the current scandal concerning Takata Corp. and its potentially faulty car air bags tied to four deaths in the United States are hurting its business, its customers are unlikely to drop the Japanese supplier for now. At least, carmakers cannot just entirely shift to another supplier, since it would be very costly and could cause a disruption in production, a person privy with the matter told Reuters.

While rival suppliers are getting some business away from Takata’s customers, the industry doesn't have enough idle capacity to grab them all from the Japanese company. That is for now. In the next few years, carmakers would be launching new models, which may not be fitted with Takata’s airbags, given the magnanimity of the recall in the US – a true test of customers’ loyalty to the company.

"Takata's not going away," remarked Scott Upham, president of Valient Market Research and a former executive at the Japanese supplier and at TRW Automotive Holdings Corp. He added that as per Japanese tradition, Takata will “take their lumps” and quiet about it and then make it up to its customers over time.

Industry officials have noted that Takata has a cash position strong enough to survive the crisis, adding there are yet indications that its customer would ditch it. Since airbags are built into a car's design, they can be replaced by another make.

Likewise, vetting the safety of a new design takes both time and money. So far, the recall has involved 7.8 million cars sold in US locations with high humidity. Three US senators, however, are calling for the shift from regional callbacks to a nation-wide recall, which would mean another 5.3 million units, according to Reuters calculations based on data from the carmakers and the National Highway Transportation Safety Administration.

Topics: takata, airbag, recall

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