Japan Airbag Maker Takata Reports $46M Loss

By ELAINE KURTENBACH | November 9, 2015

Embattled Takata Corp. reported a half-year loss of 5.6 billion yen ($45.8 million) on Friday due to recall costs, as Toyota announced it would stop using Takata airbag inflators at the center of the company’s massive product safety scandal.

Tokyo-based Takata cut its profit forecast for the full fiscal year that will end in March by 75 percent, to 5 billion yen ($41 million) from 20 billion yen, reflecting the expense of recalls for defective airbags that affect millions of vehicles globally.

Takata’s financial report capped a week of bad news for the company after at least three major customers, including Honda Motor Co., said they would stop purchasing the types of air bags involved in the recalls.

On Friday, Toyota Motor Corp. president Akio Toyoda said the world’s top-selling automaker will stop using Takata’s ammonium nitrate airbag inflators but didn’t provide details.

Takata had forecast a 7.5 billion yen ($62 million) net profit for the fiscal first half. Its net loss a year earlier was 35.2 billion yen.

Takata said its sales totaled 359.4 billion yen ($2.95 billion) in April-September. It kept its full-year sales forecast at 720 billion yen ($5.9 billion). Apart from airbags, it also makes other car parts including seatbelts and steering wheels.

On Tuesday, U.S. auto safety regulators fined Takata $70 million for concealing evidence for years that its airbags are prone to explode with grisly consequences. The defect is linked to eight deaths and more than 100 injuries worldwide.

The spate of bad news prompted heavy selling of Takata’s shares, which fell 6.2 percent on Friday and lost nearly 40 percent for the week.

Takata has agreed to phase out airbag inflators that use ammonium nitrate, the propellant blamed for the explosions. It also agreed with the National Highway Traffic Safety Administration to a schedule for replacing many of the devices already in use over the next two years.

Takata uses the chemical ammonium nitrate to create an explosion that inflates airbags, but it can deteriorate over time, especially when exposed to moist air.

In the U.S., about 23.4 million Takata driver and passenger airbag inflators have been recalled on 19.2 million vehicles sold by 12 auto and truck makers. As of Oct. 9, only 22.5 percent of the recalled inflators had been replaced nationwide, but the pace is a bit faster in high-humidity states like Florida, which have been given priority.

Repairs have been slowed by the magnitude and complexity of the recalls and by limits to the number of replacement parts that are available.

Three other parts suppliers, Autoliv Inc., Daicel Corp. and ZF TRW Automotive Holdings Corp., are making inflators for Takata-assembled repair modules, and are gaining market share as Takata struggles to cope with the scandal.

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