Takata's $24 Billion Worst-Case Scenario

Steph Willems
by Steph Willems

The cost of a comprehensive recall of all Takata Corporation airbag inflators could sink the company.

A source at airbag manufacturer Takata told Bloomberg that a worst-case scenario — a recall of 287.5 million airbag inflators — would cost the company $24 billion dollars, far more than analysts previously estimated.

The cost would be the equivalent of four times the projected revenue Takata expects for the 2015-2016 fiscal year, or six times the total value of the company’s assets.

Takata’s shares nosedived after the estimate was made public, dropping nearly 20 percent, while automakers who sourced the company’s airbags saw corresponding dips.

The spreading nature of the recall, the result of exploding airbags linked to nine U.S. deaths, has caused Takata’s stock to shed nearly 70 percent of its value since last fall. This latest news casts doubt on Takata’s ability to weather the storm.

Eight days ago, it was reported that Takata was planning to sell most of its shares in other companies —including several Japanese automakers — in order to finance the ongoing recall.

After that, Reuters reported that Takata was on the hunt for capital, and had started estimating potential recall costs to determine how much they will try to raise. The number they landed on provided the latest bombshell for the company.

Besides recalling a climbing number of affected vehicles, Takata has to demonstrate what caused the explosions to the National Highway Traffic Safety Administration, or at least prove that its airbags are safe. The company has until the end of 2019 to do that.

As of mid-March, 24 million vehicles from 14 automakers have been recalled in the U.S. — including a car owned by NHTSA chief Mark Rosekind — with 7.1 million inflators replaced.

Honda and Toyota have said they will stop using Takata-sourced airbags in new vehicles.

Steph Willems
Steph Willems

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  • SCE to AUX SCE to AUX on Mar 30, 2016

    As an engineer, this story saddens me. Stonewalling and test data fakery aside, this really comes down to a failure of chemical and mechanical engineering. Propellant that explodes when exposed to long-term humidity, and the failure to "keep the powder dry" (literally) - both are due to lax design and testing. Worse, the same weak design was propagated through many products. Nobody realized that the entire company's fortunes rested on the pillars of engineering integrity.

  • Jasper2 Jasper2 on Mar 31, 2016

    ALL Takata senior management needs to go to jail for a year for every death. They knew. Yes, they knew and keep sending these defective airbags to multiple manufacturers 'round the globe. Bastards.

    • 05lgt 05lgt on Mar 31, 2016

      You'd have about as much luck convincing a Takata exec that their airbags are inherently dangerous as you would convincing an oil extraction exec that AGW isn't an evil plot. It's very hard to see that the butter on your own bread is stolen. Human brains don't work that way.

  • ToolGuy This might be a good option for my spouse when it becomes available -- thought about reserving one but the $500 deposit is a little too serious. Oh sorry, that was the Volvo EX30, not the Mustang. Is Volvo part of Ford? Is the Mustang an EV? I'm so confused.
  • Mikey My late wife loved Mustangs ..We alway rented one while travelling . GM blood vetoed me purchasing one . 3 years after retirement bought an 08 rag top, followed by a 15 EB Hard top, In 18 i bought a low low mileage 05 GT rag with a stick.. The car had not been properly stored. That led to rodent issues !! Electrical nightmare. Lots of bucks !! The stick wasn't kind to my aging knees.. The 05 went to a long term dedicated Mustang guy. He loves it .. Today my garage tenant is a sweet 19 Camaro RS rag 6yl Auto. I just might take it out of hibernation this weekend. The Mustang will always hold a place in my heart.. Kudos to Ford for keeping it alive . I refuse to refer to the fake one by that storied name .
  • Ajla On the Mach-E, I still don't like it but my understanding is that it helps allow Ford to continue offering a V8 in the Mustang and F-150. Considering Dodge and Ram jumped off a cliff into 6-cylinder land there's probably some credibility to that story.
  • Ajla If I was Ford I would just troll Stellantis at all times.
  • Ronin It's one thing to stay tried and true to loyal past customers; you'll ensure a stream of revenue from your installed base- maybe every several years or so.It's another to attract net-new customers, who are dazzled by so many other attractive offerings that have more cargo capacity than that high-floored 4-Runner bed, and are not so scrunched in scrunchy front seats.Like with the FJ Cruiser: don't bother to update it, thereby saving money while explaining customers like it that way, all the way into oblivion. Not recognizing some customers like to actually have right rear visibility in their SUVs.
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