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.