US: Airbag recall could push Takata to loss - report
Airbag recall could tip Takata back into loss this fiscal year. Analysts have estimated a cost of about $500m
Takata could book a US$500m charge and post a net loss this year - its second in three years - as a widening recall of air bag inflators begins to cause concern despite its deep pockets, a media report said.
The supplier's chief executive Shigehisa Takada apologised to shareholders at the company's annual meeting on Thursday (26 June) but said the company was still tallying the costs of the recall, according to Reuters news agency sources who attended the closed-door session.
Automakers have recalled 10.5m vehicles over five years to fix Takata air bags deemed at risk of exploding and shooting shrapnel at drivers and passengers, in what has become one of the five biggest recalls in automotive history. At least two deaths are alleged to have been caused by faulty air bags.
Creditors are not overly worried about the financial health of Takata, which has about $1bn of cash on its books, but are closely watching the company, banking sources told the news agency.
The safety parts maker faced questions from shareholders about potential losses and recall-related costs as well as its sluggish share performance at the shareholders' meeting, which came just days after the latest recall of 5.2m vehicles, Reuters said.
Several analysts told the news agency they were assuming a cost of around $90 to $100 per recalled vehicle, based on replacement part prices, labour costs and other factors.
That could mean a charge of around $500m for the fiscal year to 31 March in connection with this month's recalls, pushing Takata into a net loss for the year.
The company had forecast a JPY16bn ($157m) profit for fiscal 2014/15 after returning to the black last year from a record JPY21.1bn net loss in 2012/13, Reuters noted.
The report added that Takata booked a $300m charge, equivalent to a cost per vehicle of about $75, last year, shortly after car makers recalled 4m vehicles worldwide over potentially exploding passenger side air bags.
The cost of the latest recall could escalate if a safety investigation in the United States finds evidence that driving in high humidity increases the risk of air bag explosions, as officials have indicated is possible.
NHTSA, when asked by Reuters whether a national recall was necessary for the issue, said in a statement its probe was still under way and it would "take appropriate action based on our findings."
General Motors on Wednesday (25 June) said it was preparing to recall about 33,000 2013 and 2014 Chevrolet Cruze sedans in North America with potentially defective Takata air bags that could fail to inflate.
The recalls could have a long-term impact on Takata's air bag business, Koji Endo, an analyst at Advanced Research, told Reuters.
"There is the worry that the volume of transactions with vehicle makers could decline because of the recall," he said.
But he added: "The company has long had strength in design and development ... From the perspective of multiple parts sourcing as well, it would be hard to imagine large volumes shifting to other suppliers in the short term."