Takata shares dive on report that airbag-related recall costs may be $24 billion

30 Mar, 2016 10:37 am

TOKYO – Japan’s Takata Corp could face about $24 billion in costs to recall its airbag inflators in a worst case scenario, Bloomberg news reported, sending its shares tumbling by a fifth to an all-time low.

Such a scenario would involve 287.5 million airbag inflators, Bloomberg quoted a person familiar with the matter as saying.

Representatives for Takata were not immediately available for comment.

The $24 billion figure exceeds by far industry estimates that Takata could face a recall bill of about $3.5 billion if it is found to be responsible for the defective airbag inflators recalled to date, and dwarfs the company’s current assets of about $1.3 billion as of December.

Shares in Takata plunged by their daily limit to give the struggling company a market value of just $302 million.

More than 50 million airbags around the world have been recalled to replace Takata’s inflators, which can explode with too much force and spray metal shards inside vehicles. Globally, 10 deaths have been linked to the issue, mainly in the United States.

Ammonium nitrate, the explosive chemical used in the faulty air bags, is contained in around 120 million Takata inflators installed in vehicles on US roads alone.

Reuters last month reported that US auto safety regulators are examining whether more of the company’s inflators will be recalled because they may endanger drivers.

The company has already been fined $70 million by US transport authorities. It also faces class action suits in the United States, where the majority of airbag-related injuries occurred.

A handful of investigations by Takata, automakers and transport authorities are currently underway to determine the root cause of the inflator defect, and automakers have said they would discuss how to split the cost of the recalls with Takata once the cause is identified.

Major automakers including Honda Motor Co (7267.T) and Toyota Motor Corp (7203.T) have said they will stop using Takata airbag inflators in new vehicle models, and have been sourcing replacement inflators from alternative suppliers. -Reuters

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