I have written several articles about the issues with the airbags from the Japanese firm, Takata, over the last few years:
28th December 2014 – Airbag Recall
Back in July last year, The National Highway Traffic Safety Administration (NHTSA) announced with Takata that a further 2.7M inflators were being recalled – bringing the number to over 100M in total. Ford, Mazda and Nissan were the main manufacturers infected and many of the inflators were actually replacements for previously recalled product.
This was a major blow for Takata who had insisted that they had discovered the issue, fixed it and were shipping a quality product. Clearly this wasn’t the case and Ford was hit the hardest with over 2M of their cars affected, some built long after the original recall was announced.
The result for Takata has been what many people expected – they filed for bankruptcy due to the ever growing cost of fixing an ever growing problem. So mid year they filed for bankruptcy protection in Japan and the US and at the same time sold off a substantial part of their business to a US company – and competitor – Key Safety Systems, based in Michigan. The US protection also protects Key Safety Systems from ongoing litigation despite them not buying the offending assets.
The deal, priced at US$1.6B means that all the non-airbag divisions of Takata would move under the US company who also make their own airbag systems. Clearly, and sensibly, they want no part of such a failure, so this remaining piece of Takata stays under the original brand and would be restructured to provide more airbag inflators to continue the ongoing recall.
The manufacturing of the Takata equipment is expected to continue to about 2020 and as the recall work is reduced, so will the entity until it is finally closed down.
The deal is not expected to cover all the liabilities of the recall and Takata has agreed to create a fund to help the manufacturers deal with their associated costs and one for individuals who have been injured by an airbag exploding. To do this, the company has had to borrow over $200M from its main creditors.
The main issue is still that most of the affected airbags from the original recall have not been replaced. The manufacturers have been very vocal about the need for the recall, however two factors appear to be getting in the way. The first is that many owners are not the original buyer of the vehicle and do not use the manufacturer’s dealer network to get their car serviced – if the vehicle gets serviced at all. Despite all the media coverage, the message just didn’t get through.
Secondly, even when the owners contacted the manufacturer, there were not enough new airbags ready to complete the work. This has delayed many recalled cars from being fixed. To counter this, Takata’s competitors started to provide a more reliable replacement kit with estimates suggesting that up to 70% of cars fixed had non-Takata equipment fitted instead.
It still remains to be seen whether all the costs can be covered by the miniaturised Takata. They have sold off all the good assets to help pay for the bad ones and are likely to not make much revenue in the future. At some stage they will go under completely leaving lots of poor quality product out in the world and a group of creditors with a load of bad debt on their books.