Takata may take a $500M charge and a net loss over airbag recall

Article by Andrew Christian, on June 30, 2014

Takata Corp. could take a $500-million charge and post a net loss this year as an expanding recall of airbag inflators gives rise to financial worries despite its deep pockets. A number of carmakers across the globe have called back 10.5 million vehicles over five years to fix Takata airbags that could explode and shoot shrapnel at drivers and passengers.

Creditors, however, are not overly concerned about Takata’s financial health as it still boasts of around $1 billion of cash on its books, banking sources told Reuters. Despite that, creditors are observing the supplier after customer-carmakers recalled 5.2 million cars this month due to the issue.

Koji Endo, an analyst at Advanced Research, said that there are concerns that the volume of transactions with carmakers might decline due to the recall.

He, however, remarked that Takata has long had strength in design and development – which means that it would be hard for carmakers with large order volumes to shift to other suppliers in the short term.

The issue has already prompted a nearly 30-percent drop on the shares of Takata since the start of 2014. Takata’s Japanese customers like Honda Motor Co. and Toyota Motor Corp. this month called back millions vehicles acround the world equipped with Takata’s airbags, over concerns of defective possibly defective air bag inflators made in 2000-2002.

Honda and six other carmakers separately announced this week that were going to issue recalls of vehicles some high-humidity regions of the United States, as per request of the National Highway Traffic Safety Administration.

The affected vehicles will have their Takata air bag inflators replaced. A number several analysts were estimating a cost per recalled vehicle of between $90 and $100, based on replacement part prices, labor costs and other factors.

Topics: takata, airbag, recall

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