Takata shares plunge 20% as Honda dumps it as airbag supplier after record US fine

Takata Corp Chairman and President Shigehisa Takada answers questions at a press conference in Tokyo on Nov 15, 2015.
Takata Corp Chairman and President Shigehisa Takada answers questions at a press conference in Tokyo on Nov 15, 2015.PHOTO: AFP

TOKYO (BLOOMBERG, AFP) - Takata shares plunged nearly 20 per cent on Wednesday (Nov 4) after top client Honda dumped it as an airbag supplier following US regulators' move to slap it with a record regulatory fine.

The stock fell as much as 19.8 per cent to 1,100 yen (S$12.66) in early afternoon, after US authorities announced up to US$200 million in fines and Honda said it will stop using air-bag inflators linked to at least eight deaths and scores of injuries globally.

Honda said said it's aware of evidence suggesting the supplier manipulated air bag inflator test data and will no longer use the components in new models under development.

"The biggest point here is that they suggested Takata has manipulated data for the first time," said Shintaro Niimura, a credit analyst at Nomura Holdings. "If it's true, that may change the whole situation. It may affect carmakers' attitudes that have been supportive and negotiations on sharing recall cost would also be affected."

While Takata omitted information from its reporting to automakers, it didn't manipulate test data, Hiroshi Shimizu, a senior vice president and member of the company's board of directors, told reporters at a press conference on Wednesday (Nov 4). The company will stop using ammonium nitrate as the chemical propellant to inflate its air bags and switch to a compound called guanidine nitrate, Takada said.

Takata president Shigehisa Takada said "there's risk" when asked whether the company will survive during the press conference.

Honda's allegations may affect ongoing class-action lawsuits and an investigation by the US Justice Department, Mr Niimura said. As part of an order agreed to with the National Highway Traffic Safety Administration, Takata admitted to violating US auto-safety law provisions after its defective air bags killed seven and injured almost 100 people in the country.

Takata admitted it failed to notify NHTSA of a defect within five days in connection with six recalls, and didn't provide explanations of documents given to the regulator under two investigative orders, the agency said.

The allegations by Honda are significant because the automaker is Takata's largest customer and one of its top shareholders. The supplier has counted on carmakers to continue ordering its safety devices and shoulder some of the costs of recalls, which span more than 19 million vehicles in the US alone.

Honda said it's now moving on a global basis to alternative suppliers for front driver and passenger air bag inflators in all new models it has under development.