Naomi Tajitsu and David Morgan
TOKYO/WASHINGTON — Reuters
Published
Last updated
Honda Motor Co said it will no longer use
front air bag inflators made by Japan’s Takata Corp, raising questions
about the future of the embattled parts supplier.
Takata,
which counts Honda as its biggest air bag customer, was fined
$70-million (U.S.) by the leading U.S. auto safety regulator on Tuesday.
Shares in the Japanese auto parts firm slumped by as much as a fifth in
Tokyo on Wednesday.
Regulators have linked eight deaths – all
in Honda cars – to the Takata inflators, which use ammonium nitrate and
can explode with too much force, spraying metal fragments inside
vehicles.
The fine adds to a growing
list of potential bills Takata could face. To date, automakers have
primarily borne the cost of ‘investigative’ or voluntary recalls as the
root cause of the inflator defect hasn’t yet been found. If recalls
become official, the cost could switch to Takata.
Having
to pay around $100 to fix each of the many millions of cars would cost
Takata more than its current market value of around $820-million. Around
40 million cars have been unofficially recalled worldwide since 2008
over Takata air bag inflators.
Along
with the fine, the U.S. National Highway Traffic Safety Administration
(NHTSA) ordered Takata to stop using the potentially dangerous
propellant in its products.
“DEEPLY TROUBLED”
In
a harshly worded statement, Honda said it would no longer use Takata’s
inflators in front-seat air bags, saying it was “deeply troubled” by
evidence suggesting Takata “misrepresented and manipulated test data for
certain air bag inflators”.
Honda
makes up around 10 per cent of Takata’s global sales, and is its biggest
customer for air bags, which account for 38 per cent of the supplier’s
revenue.
The air bag scandal dominated
Honda’s quarterly results presentation in Tokyo on Wednesday, with the
company saying that quality-related issues, including air bag recalls,
accounted for 1.9 per cent of second-quarter revenue, almost double the
amount since 2013.
Honda’s move
highlights its impatience with Takata, and raises fresh uncertainty over
the supplier’s prospects. Takata already faces criminal investigations
and lawsuits in the United States.
Honda
Executive Vice President Tetsuo Iwamura declined to comment on possible
legal action against Takata, or the future of the firms’ relationship.
“Once we determine an official cause of the defect, we plan to discuss
issues of responsibility (with Takata),” he said.
WILL OTHERS FOLLOW HONDA?
Honda
did not specify what alternatives it would use, but it has been buying
more air bag inflators from Takata rivals including Autoliv, TRW
Automotive Inc and Daicel Corp.
“Honda
has taken a significant hit from this,” said Christopher Richter, senior
analyst at consultants CLSA. “If the maker can’t figure out what the
root cause is, can they afford the risk of continuing to use them as a
supplier? For Honda, that’s a no,” he added.
Among
other leading Japanese automakers, Toyota Motor Corp said it would take
further action on air bag inflator issues as necessary. It has
previously said it was testing rival air bag inflators. Nissan Motor Co
said it would defer to NHTSA on actions related to Takata, but noted it
was “surprised and disappointed” with the company’s conduct.
“Because
they make their own inflators, Takata earns high margins on its air
bags. If more automakers use (rival) inflators, Takata’s profit could
suffer even more than sales,” said Koji Endo, auto analyst at Advanced
Research Japan.
“Other companies see the risk of using Takata inflators so they will likely follow Honda and avoid using them.”
TAKATA SAYS WILL COMPLY
In
its statement, NHTSA accused Takata of providing “selective, incomplete
or inaccurate data” from 2009. The regulator also said it could demand
an additional $130-million fine if Takata does not comply, or new
violations are found.
Takata said it
would phase out ammonium nitrate in all its inflators by end-2018, even
though it had not yet determined the root of the problem.
“We
still think our product is safe, but we realise there are many concerns
from consumer, automakers and U.S. regulators,” Takata chief Shigehisa
Takada told reporters.
Takata will pay the $70-million fine in six instalments through October 2020.
Experts
say the ammonium nitrate used as a propellant in the inflators could
become unstable after being exposed to high humidity over a period of
time. Some have suggested that auto design, including how well sealed
passenger compartments are against humidity, could also be a factor.
Takata shares closed down 13.4 per cent at 1,189 yen, their lowest close in nearly a year.
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