Mon, May 18, 2015 page15

• Takata locked into car supply chain

  • Reuters, TOKYO
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  Airbag manufacturer Takata Corp and Japanese automakers including Honda Motor Co are locked in the commercial equivalent of a bad marriage: Not entirely happy in each other’s company but unable to break apart and wary of potentially costly court battles.

  Honda on Friday unveiled a new model with an unusual sales pitch — fuel efficient, lots of cargo space and no airbag inflators made by Takata, the Japanese supplier at the center of a global safety crisis that has rocked both companies.

  Over the past five years, recalls have ballooned to include 36 million vehicles fitted with potentially lethal Takata airbags, triggering a criminal investigation and lawsuits in the US, and testing ties between Takata and its main customers, bankers and auto executives say.

  

  A man walks past a Honda on display at Honda Motor Co’s headquarters in Tokyo on April 25 last year.

  Photo: AP

  Automakers do not normally discuss supply arrangements for components like airbags in their new models.

  However, in a departure that underscores an increasingly strained relationship, Honda senior managing officer Sho Minekawa said the new Shuttle station wagon sold only in Japan would use inflators from Takata’s rival, Daicel Corp.

  “We use very little from Takata for our domestic models and that’s been the trend in recent years,” Minekawa said in response to a question at the launch of the new car. “There was a time when we used a lot.”

  The uneasy dynamic explains why Japan’s automakers have not been agitating for a shakeup or even restructuring at Takata even as they give new contracts to other suppliers.

  The automakers need Takata to supply replacement parts for urgent repairs and cannot demand compensation that would endanger its ability to do so in an industry where no rival could readily take up the slack.

  A court battle could risk embarrassing disclosures about the responsibility of automakers in reviewing Takata’s designs or in pushing for cost cutting, a banker who has been in contact with Takata said.

  “The most important thing from the perspective of the automakers is that they can ensure replacement parts are being supplied in a stable fashion,” said Japanese Ministry of Economy, Trade and Industry automobile division deputy director Masaki Higurashi, who is involved in coordinating the government’s monitoring of the recall crisis.

  Any discussion of restructuring would have to wait until after that, he said.

  “After all the replacement parts are supplied, the automakers have to decide whether to let Takata stay on as it is,” he said. “I think the automakers are starting to think about that.”

  Honda, still Takata’s largest customer, recalled almost 5 million more cars last week after concluding the Takata airbags they contained were at risk of exploding in accidents. Toyota Motor Corp added another 5 million vehicles to the tally and Nissan Motor Co 1.5 million.

  Six deaths, all in Honda vehicles, have been linked to shrapnel from defective Takata airbags. Problems with Takata airbags have also been linked to more than 100 reported injuries.

  The Japanese automakers and Takata failed to agree on whether the most recent recalls were necessary based on data provided by Takata.

  As a result, there is no agreement between Takata and the automakers on how to split the costs, representatives of both sides said. That can only happen after they have determined why Takata airbag inflators are breaking down.

  Takata would not be able to go it alone. The new costs could be as much as US$1 billion if all the vehicles covered by the new recall are repaired and the US$100-per-vehicle estimate favored by analysts is applied. By comparison, Takata’s market value is a little over US$1 billion.

  Takata has allocated US$520 million to cover recall costs. At a meeting with analysts on Thursday, Takata chief financial officer Yoichiro Nomura said Takata had asked automakers to allow it to pay its share of recall costs in installments, a concession that would allow it to avoid a potentially destabilizing charge, according to analysts who attended the closed-door briefing.

  Takata chief executive officer Shigehisa Takada, whose family controls 57 percent of the auto parts maker, did not attend the meeting. Nomura told attendees the CEO was busy with quality issues.

  Honda is using a Takata competitor, Toyoda Gosei, for driver’s-side airbags for its new Accord sedan in North America, two people with knowledge of that move have said. Toyota is no longer among Takata’s top five customers.

  Even so, one purchasing manager at a Japanese automaker involved in the recalls, who asked not to be named, said the companies were forced to rely on Takata, given its 20 percent plus global market share.

  “We have no choice but to stay together,” he said.
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