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Takata airbag saga: Company likely to sink into loss

2016-05-11 10:50

GLOBAL VEHICLE RECALL: A huge global recall triggered by potentially lethal air bags made by Takata Corporation has affected many automakers, most recently Nissan Tiidas in South Africa. Image: AFP

Tokyo - Japanese auto parts maker Takata is expecting a loss instead of a profit for the fiscal year that ended in March because of ballooning costs from a massive global airbag recall.

Tokyo-based Takata, which is set to give its earnings report Wednesday ( May 4), said Monday (May 9) it is projecting an annual net loss of ($120-million). The Japanese manufacturer, which also makes seat belts, had earlier forecast a profit of 5 billion yen ($46-million). It had racked up a loss of $272-million the previous fiscal year.

11 fatalities

The US National Highway Traffic Safety Administration said last week that it's adding up to 40-million Takata airbags to the ongoing recall of 28.8-million air bags.

Inflators inside the air bags can explode with too much force and spew shrapnel into the vehicle. The inflators are responsible for at least 11 deaths worldwide and more than 100 injuries.

It is still unknown exactly how many air bag inflators have to be recalled globally as each automaker must deal with the the latest NHTSA decision.

Read: SA affected in global Nissan recall

The global recall previously totaled about 50-million inflators, but it's likely to expand to more than 100-million, adding to the already biggest recall in US history. Because of the sheer numbers involved, it will take years to manufacture replacement parts.

Takata also lowered its annual sales projection to $6.6-billion from the previous $6.7-billion.

Many automakers, including Toyota and US automaker Ford, have said they will stop using Takata inflators in future models.

Honda, Takata's biggest customer, said Monday it does not know yet how many more recalls will be added globally because of the latest NHTSA decision.

No bailout on the cards

Honda President Takahiro Hachigo has ruled out any independent financial bailout, despite speculation over a rescue package for Takata due to the mounting recall, liability expenses and other costs.

Unlike most airbag makers, Takata's inflators use the chemical ammonium nitrate. But what exactly causes the explosions is still unknown.

NHTSA says it takes a minimum of six years for the chemical to become unstable in high humidity regions. As cars age, the risk grows, especially in areas where temperatures frequently cycle from cool to hot, according to NHTSA.

Authorities in Malaysia have begun an investigation into two more recent deaths in cars with Takata airbags that ruptured.

Takata shares dipped early Monday on speculation over the growing recalls but finished little changed, down 0.3% in Tokyo.


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