By on March 30, 2016

Takata Airbag Cutaway

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.

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20 Comments on “Takata’s $24 Billion Worst-Case Scenario...”


  • avatar

    My best friend’s Acura TL needs new airbags but they aren’t going to get any for months.

    He was given a choice:

    A) leave your car here at Paragon Acura and borrow one of our boring, non-acura, rentals.

    B) Let us put you in a new TLX which will raise your monthly payments and your insurance costs.

    C) DRIVE AT YOUR OWN RISK

    Meanwhile, Hyundai’s Sonata is a superior car to the TLX and the Genesis is superior to the RLX. To Acura I say: no thank you.

  • avatar
    Pch101

    If you wanted another Death Watch series, then this one should be it.

  • avatar
    Kyree S. Williams

    It’s weird that this image is a Volkswagen steering wheel (early B6 Passat?) when I don’t believe VW was ever part of the recalls…

  • avatar
    Ubermensch

    I have been waiting 2 months for the replacement inflator to come in for my 2006 Subaru. I was told no one should ride in the passenger seat until the fix is performed. Yeah, that’s not inconvenient at all. I wonder if the company will even be able to fulfill all of the orders for replacements before becoming insolvent.

    • 0 avatar
      Land Ark

      I’m in the same boat as you, plus I’ll be getting my dash board replaced at the same time.
      I was just talking to a coworker with a Honda who said he is in a loaner until the fix is complete – probably 2 months. Subaru is offering no such help that I’m aware of. By not having loaners out, what incentive do they have to get the jobs done?

      • 0 avatar
        davew833

        In the same boat with my 07 Outback… no passengers allowed in the front seat until some unspecified future time. Fortunately, I have an 02 Outback as well that has not been recalled (yet). My mom’s driving that. I’ve gone back to driving my old ’87 Accord which has no airbags…

    • 0 avatar
      05lgt

      I’ve kept my 05’s passenger front empty for a couple of months too. No relief from Subaru in sight. Why are they able to provide less compensation than the other affected manufacturers? Do we have a class?

  • avatar
    RHD

    If my math is correct, that comes out to just under 88 dollars per airbag.
    Did Takata not have any sort of liability insurance? Or were they like Walmart, who “self-insure”?

    They find themselves between a rock and a hard place. Maybe VW can give them some advice on how to deal with this problem…

    • 0 avatar
      sirwired

      No insurer would issue an insurance policy for several times a company’s annual sales. I’m sure they had insurance, but there’s no way it covers more than a fraction of this cost.

  • avatar
    sirwired

    I’ve been saying that Takata is doomed since about Day 1. Ever since the problems were announced, any automaker would have to be nuts to NOT switch to a new supplier ASAP.

    “Innocent until proven guilty” doesn’t help a whole lot if Takata DID get “proven guilty” and an automaker is faced with replacing a bunch of airbags they could have avoided by switching suppliers. I’m surprised they had any stock value left to lose by this point.

  • avatar
    jpolicke

    I am guessing that much of the equipment and facilities in Takata’s plants are similar to other airbag manufacturing. They should have folded and been sold off to a competitor a year ago.

  • avatar
    SCE to AUX

    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.

  • avatar
    Jasper2

    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.

    • 0 avatar
      05lgt

      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.

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