Takata's $24 Billion Worst-Case Scenario

Steph Willems
by Steph Willems
takata s 24 billion worst case scenario

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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  • 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 Well the faithful 2010 RAV4 has new headlamp assemblies installed as of yesterday (ordered them a year ago and put it off until now). Have to remove the entire front fascia *and* remove part of the radiator support to change the headlamps. Ordered new side brackets and clips since the thing is pretty much designed to go together once (it comes apart when it comes apart, is what I'm saying), so we'll get to hop back in there when those show up later this week. (Alternative is to have the wrong gap at the fascia/fender interface and you know we can't have that.)Just crossed 150K mileage, engine is strong, no signs of transmission trouble. Spouse is pushing for an EV (or a Jeep, but I ignore that Jeep part). Michelins are performing well. Very high likelihood that this particular Toyota will be replaced with a non-Toyota, maybe 2 years from now.Oh, no one cares. 🙂
  • Parkave231 Needs moar grille!
  • SCE to AUX Give them everything they want, including the moon. Let the UAW determine how long they want to keep their jobs.
  • Arthur Dailey If I were a UAW leader I would focus more on political policy, such as requirements for North American content. Work harder at organizing non D3 auto plants. Try to win public support and increase union density/membership. But political unionism is not popular in the USA. Instead the focus is often on short term monetary gains.
  • Peter 20% raise to make up for the post-Covid inflation. 3% a year for the length of this contract estimated future inflation.Nothing for retired workers (It’s not the Automakers fault that the Union has stolen your money. Go talk to the 2 guys sitting in Jail)