Auto industry watchers wonder how the airbag recall will affect Takata, the manufacturer. Honda may also feel sting.
As the airbag recall continues to gain traction, industry insiders are wondering what it will mean for the manufacturer of the system that is central to the whole issue, Takata. Is it also possible that the popular automaker, Honda, will also feel the sting, one way or another?
According to a report on the Reuters news wire, Takata is unlikely to feel any major impact from manufacturers in the short to medium term as it could prove very disruptive and very costly for manufacturers. However, in the longer term, the number two safety equipment maker, Takata, may see an impact to its revenues.
The Reuters report noted that while some business has quietly moved to other manufacturers, the industry doesn’t have the capacity now to allow changes. However, as models change over the next several years, the industry’s loyalty to Takata, based in Tokyo, is likely to be tested.
“Takata is not going away,” says Scott Upham, a former executive at Takata and at TRW Automotive Holdings. Upham, now president of Valient Market Research, noted that “In traditional Japanese fashion they are going to take their lumps, be contrite and quiet about it.” Over time, Takata will likely try to make it up to Honda, a major customer, and other manufacturers.
For more than a decade, Honda has sourced most of its airbags through Takata. Indeed, since 2008 16 million vehicles have been recalled due to defective Takata airbags. The bulk of those cars were made by Honda. One wonders, though, if that reliance of Takata airbags will have an impact on Honda sales in the long term.
The airbags that have faced recall are usually located in warm, humid areas like the U.S. South, Mid-Atlantic, Puerto Rico, the Virgin Islands, the Gulf, Hawaii, American Samoa, Saipan and Guam. When installed in vehicles that are garaged in these areas, the humidity causes the explosive used to inflate the airbags to deteriorate. On deterioration, the entire inflator assembly feels the impact as a deployment causes the inflator housing to scythe out of its holder and into the passenger compartment. In turn, the pieces of the broken housing act as shrapnel that is propelled into passengers.
So far, four deaths have been attributed to the failed airbags. The latest death occurred in southern Florida early this month when a driver slammed into a line of standing vehicles. The airbags in the vehicle involved, a 2001 Honda, deployed and sent shards into the passenger compartment striking the lone occupant, the driver. The driver was hit in the throat in the accident. Law enforcement officials said the accident injuries claimed the driver, though, safety officials are linking this to the defective airbags.
Takata will likely ride out this round of the airbag recall because there just isn’t enough capacity left for automakers to go elsewhere. However, as the Reuters report noted, there are some questions about its longer-term viability.
For example, Takata has the financial resources now to ride out its troubles. And, given the state of the industry, there isn’t enough capacity for automakers to find new sources. In this scenario, it is unlikely that automakers could or would leave Takata.
Takata is also in a strong position as the cars that are now being manufactured and those in the middle or final stages have their airbags specifically tailored for a specific design. Because they are designed into a vehicle, manufacturers cannot leave Takata’s orbit. Two reasons militating further against a wholesale abandonment of Takata is that it takes time to find a new manufacturer and then to have that manufacturer approved, as well as the fact that, as noted, airbags are designed into a new vehicle.
These factors play into Takata’s favor. The Reuters report also noted that there’s no airbag manufacturer with additional capacity to take Takata’s place. No automaker would be able to make such a change without facing huge disruptions.
On the downside, though, Takata could face major problems if the now-”limited” regional recall of 7.8 million vehicles is made nationwide. That could potentially add an 5.3 million vehicles to the recall list just this year alone. A nationwide recall would affect 13.5 million vehicles. To put this into a wider context, since the recalls were started in 2008 – the recalls were for 2008 and earlier models – the recalls could potentially affect 29.5 million vehicles. As many of them were, as noted, Honda vehicles, one has to wonder what the ultimate impact of the recall may be on Honda or other manufacturers who have installed their airbags. Indeed, some have speculated about the impact of the recall as they see consumer confidence in the auto industry falling due to it.
The number of recalled vehicles could climb to 13.5 million in the wake of calls by three senators for a widened recall. Takata has put aside more than $690 million to pay for the recall work. If, however, the recall were expanded, it would be hard-pressed to meet the demand as there are not enough inflator units available, at this moment.
A House committee will be meeting this week with officials from the NHTSA regulators to look over the details of the recalls.
Spurred by several lawsuits, the recall comes at a time when the NHTSA is conducting a probe of Takata airbags. The probe is focusing on the explosive inflators and how well they were sealed. Takata has worked with the agency and auto industry to identified and fix affected vehicles.
Marc Stern has spent more than 40 years in and around cars. His work has included answering motorist questions, motor vehicle reviews and evaluation and writing dealers, consumer and industry news pieces. In addition, Mr. Stern has contributed to well-known automotive publications including Popular Mechanics, Mechanix Illustrated, AutoWeek and Old Cars Weekly, among others.