Two more deaths in Malaysia linked to Takata airbags

A logo of Takata Corp is seen with its display as people are reflected in a window at a showroom for vehicles in Tokyo.
A logo of Takata Corp is seen with its display as people are reflected in a window at a showroom for vehicles in Tokyo. PHOTO: REUTERS

KUALA LUMPUR (Bloomberg) - Honda Motor Co. said two fatal crashes in Malaysia involved ruptured airbag inflators made by Takata Corp., bringing the global number of deaths linked to the defective devices to 13 as the US ordered the Japanese supplier to widen the scale of its recalls.

The two crashes took place on April 16 and May 1 in Sabah and Kedah, respectively, and involved ruptured driver-side airbag inflators made by Takata, according to the Honda statement dated May 4.

Both vehicles were included in recalls announced by Malaysia requiring replacement of the front airbag, the carmaker said.

"Honda Malaysia is working with the local authorities to get the database of current owners of these cars and communicate with them on the recall," Jordhatt Johan, a spokesman for Honda Malaysia, said by phone on Thursday (May 5).

"This should be a wakeup call for Malaysia" to ensure cars are taken off the roads until they are repaired, said Jochen Siebert, managing director of JSC (Shanghai) Automotive Consulting Co. "Once they do this or similar actions, it will of course give Honda a bad name and in the end one more reason for any carmaker to disassociate themselves from Takata."

Takata said it was working in "close collaboration with Honda to determine the facts and circumstances surrounding the situation."

A spokesman for Malaysia's Ministry of Transport didn't immediately return calls to his mobile phone.

While the official cause of death hasn't been determined in the latest two cases, the crashes add to the first known death in Malaysia in 2014 linked to Takata-made airbags.

In the first case, an eight-and-a-half-months pregnant driver died after a collision set off the airbag, which ruptured and fired a one- inch-wide shard of metal into her neck.

A researcher hired by a coalition of automakers said in February that moisture seeping into Takata's inflators was determined to be the reason that the air bags may rupture. The National Highway Traffic Safety Administration (NHTSA) on Wednesday ordered the company to replace as many as 40 million additional air bags in the US, more than double what has been announced.

At least 13 deaths are now linked to the malfunctioning devices, underscoring the scale of the crisis confronting President Shigehisa Takada, who has seen his family company's market value plunge by 75 percent in the past year.

The expansion of recalls in the US also adds to the costs that the supplier must bear even as it seeks a financial lifeline to survive.

Expanded Recalls

NHTSA's order is in addition to the 28.8 million inflators Takata had previously called back in the US, affecting vehicles made by 12 different manufacturers including Honda Motor Co., Toyota Motor Corp. and Fiat Chrysler Automobiles NV.

With the latest development, as many as 69 million inflators will be recalled. Seventeen manufacturers are now covered, including Tesla Motors Inc., Jaguar Land Rover Automotive Plc and Fisker Automotive Inc.

Credit Suisse Group AG has estimated that a recall of 50 million vehicles would cost the company about 375 billion yen (S$4.75 billion), more than the value of its net assets. The number may increase to 75 million if it was limited to air bags without drying agents, according to Credit Suisse in a March 30 note.

Takata put the tab for a comprehensive callback - involving 287.5 million air-bag inflators - at about 2.7 trillion yen, according to a person familiar with the matter back in March.

A researcher hired by a coalition of automakers said in February that moisture seeping into Takata's inflators was determined to be the reason the air bags may rupture. Using a drying agent, or desiccant, in the propellant prevents moisture from destabilising the compound.

'Shared Interest'

In an e-mailed statement, Tokyo-based Takata agreed to act on NHTSA's request because of "shared interest towards future safety and restoring public confidence." The company said it wasn't aware of any ruptures involving the newly recalled population of air bags.

The latest recalls are just accelerating a longer-term decline in demand for air bags given the advance in assisted driving technology like collision avoidance and automatic braking, according to Yale Zhang, a managing director at Autoforesight Shanghai Co.

With automakers and technology companies including Alphabet Inc.'s Google working on fully self-driving cars, "passive safety systems like air bags are becoming a commodity and will eventually be phased out with the cars of the future," he said.

Even so, it has been a fall from grace for Takata, which started in 1933 as part of the textile weaving industry and was among companies that produced parachutes for the Imperial Army during World War II.

It later rose to prominence as one of the world's largest makers of seat belts.

Overseas Push

The company entered the air-bag business in the 1980s at the behest of Honda Motor Co. That decade also marked Takata's first forays outside of Japan. The company set up its first plant in Asia outside of Japan in South Korea in 1980, and began production in Britain in 1988. Takata set up its first joint venture in the US in 1984.

The late Juichiro Takada, father of the current president, took the company public in 2006 and pushed expansion in overseas markets before his death in February 2011. Today, more than 80 per cent of Takata's sales are outside Japan.

Takata this week increased provisions for its air-bag recalls, booking a combined 20.1 billion yen in charges, excluding costs related to recalls that are still under investigation, according to a statement on Monday. The company is scheduled to announce full-year results on May 11.

Seeking Sponsors

Takata is seeking sponsors that would replenish its capital and allow it to emerge as a new company, a person familiar with the matter said last month. Takata has estimated cash and equivalents may drop 24 percent to 49.7 billion yen by the end of March 2017 if recalls continue at the current pace, the person said. The company has a market value of 31 billion yen.

"The expansion of the Takata recall is no doubt a severe blow to the company and its future prospects," said Scott Upham, founder of Valient Market Research, who has followed the air-bag industry for more than two decades.

"It is our forecast that Takata will ultimately survive this recall as a smaller supplier of seatbelts and electronics. Takata will likely need to exit the inflator business and possibly go through a bankruptcy phase in order to survive."