Recalled Airbag Inflators May Cost Takata As Much As $24B: Report
Takata Corporation may end up paying as much as $24 billion in costs related to recalled airbag inflators contained in millions of vehicles, due to problems where the device may overinflate and cause the airbags to explode.
According to a report by Bloomberg News, the Takata airbag recalls have impacted an estimated 287.5 million inflators installed in vehicles around the world, and a person familiar with the matter has indicated the supplier may face costs totaling about 2.7 trillion yen, which equates to about $24 billion in U.S. dollars.
The recalled airbag inflators pose a serious risk for millions of vehicles still on the road, potentially causing the airbag to explode and send metal pieces and debris shooting into the passenger compartment. At least ten deaths and hundreds of severe injuries have already been linked to the problems.
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Nearly every major automaker has been impacted by the recalls, including Honda, General Motors, Ford, BMW, Mercedes Benz, Volkswagen, Nissan, Mitsubishi, Chrysler (FCA), Mazda, Toyota, and various others. Of the nearly 300 million inflators recalled, as many as 120 million were installed in vehicles in the U.S. alone.
The United States automobile market has been riddled by the Takata airbag recalls, with estimates suggesting that nearly 40% of automobiles on the road may be subject to recalls due to faulty ammonium nitrate based Takata airbag inflators.
Amid concerns about the pace of recall repairs, the National Highway Traffic Safety Administration (NHTSA) issued a Consent Order in November 2015, which requires Takata to be cooperative with the agency in all future actions involving the recall investigation and demands that the NHTSA be head controller of the recall campaigns in the U.S., granting the agency exclusive control in organizing and prioritizing the recall process to speed up the repairs. In addition, the NHTSA fined Takata $200 million.
The efforts to repair vehicles with recalled airbag inflators have faced an uphill climb, as additional recalls continue to be issued, adding more and more vehicles to the list.
In December, the NHTSA announced that the repair process had begun accelerating, after subcontracting out 70% of the required replacement inflators from Takata, indicating that it had reach a 27.3% repair rate of the nearly 30 million vehicles recalled. The agency’s announcement was then followed by nearly 7 million additional vehicles being recalled in the first two months of 2016, involving automakers such as Ford, Mazda, Honda, Volkswagen, Audi, Saab, Saturn, and Mercedes Benz.
Under the consent order, the NHTSA ordered Takata to stop manufacturing phase-stabilized ammonium nitrate propellant inflators that investigators believe are the root cause of the problems. Investigators from the agency have insisted the inflators ammonium nitrate based propellants are unstable when exposed to high humidity causing them to rupture either spontaneously or when needed in automobile crashes.
The ammonium nitrate based inflators have been found to pose explosion risks under certain conditions, unlike normal inflators. Investigations by the NHTSA have identified the inflators are more susceptible to explode in more humid climates, mainly southern regions of the U.S. that are closer to the equator. The NHTSA has specifically stated that the ammonium nitrate based propellants may not be suitable for inflator designs due to the unknown effects of climate impact.
Takata airbags have caused devastating injuries when shrapnel projected from the inflator housing at rapid speeds was sent flying towards drivers and passengers. First responder reports have detailed horrific incidents where the shrapnel has projected into the occupied cabins leaving passengers with lethal and non-lethal lacerations to the head, face, neck, shoulders and torso regions.
The Bloomberg News report estimates that the Takata airbag inflator recall could potentially send the company into a troubling stage of financial distress, indicating that the recall costs will far exceed the current assets estimated at $1.3 billion as of December 2015. In addition to just the recall and repair costs, the class action lawsuits accumulating in the U.S. are anticipated to add further monetary responsibilities to the company’s shoulders.
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