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 The National Highway Traffic Safety Administration (NHTSA) also
scolded Takata for what it called "an unwillingness to move forward"
on a nationwide recall, and said the company needs to be open with
the U.S. public about the risks of its air bags.
Takata and automakers have so far taken a targeted approach in
recalling U.S. vehicles with air bags that can rupture upon
deployment, shooting shrapnel into the car. Five fatalities,
including four in the United States, have been linked to the air
bags.
The U.S. regional recall has involved 4.1 million cars in hot and
humid areas where the air bags may be prone to fail, including
Florida, Alabama, Mississippi, Georgia, Louisiana and parts of Texas
along the Gulf of Mexico. Most of those cars are made by Honda
Motor, Takata's biggest client.
In a call with reporters on Tuesday, NHTSA Deputy Administrator
David Friedman declined to estimate how many more cars would be
included in a nationwide recall.
Shares in Takata dropped by as much as 7.8 percent in Tokyo on
Wednesday, and have now slid 64 percent this year to 5-1/2-year
lows.
Takata has already set aside more than $750 million for
recall-related costs, but Takayuki Atake, manager of credit research
at SMBC Nikko Securities, warned a national recall would need more
provisioning and raised the risk of a deeper credit rating downgrade
than initially expected.
Japan Credit Rating Agency has put Takata's single-A rating on
negative watch. "However, risk of a (three-notch) downgrade to BBB
would increase if the expanded recall leads to further erosion of
shareholder equity and/or a negative impact on Takata's capacity for
generating profits and cash flow," Atake wrote in a report.
Takata, NHTSA, Honda and Chrysler have been called to testify at a
U.S. Senate Commerce Committee hearing on Thursday, where Takata
will be represented by Hiroshi Shimizu, a 36-year company veteran
and senior vice president of global quality assurance.
MILLIONS MORE?
Around 16 million cars with Takata air bags have been recalled
worldwide over the past six years, with more than 10 million of
those in the United States.
NHTSA's Friedman said the recall expansion was prompted by an August
incident involving a 2007 Ford <F.N> Mustang in North Carolina,
outside the area of the regional recalls.
The agency ordered Ford, Mazda Motor <7261.T>, Honda, Chrysler <FCHA.MI>
and BMW <BMWG.DE> to send notifications for replacement driver-side
air bags to consumers quickly. "We will begin a process both with
Takata and the automakers to force them to recall all affected"
vehicles, Friedman said.
Ford, Honda, Mazda and Chrysler said they would continue to
cooperate with NHTSA and plan to evaluate their call for a national
recall. But each stopped short of saying they would expand beyond
the current set of cars they are fixing. BMW is already recalling
air bags nationally.
Spokesman Alby Berman said Takata would cooperate with regulators
and automakers if an expanded recall is required, but noted that "of
almost 1,000 passenger and driver inflators from outside the high
humidity areas that have been evaluated to date, none have
ruptured."
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"Takata is concerned that a national recall could potentially divert
replacement air bags from where they're needed, putting lives at
risk," he said in a statement.
It's unclear just how long it could take to replace so many air
bags. NHTSA said it is pressuring Takata to ramp up production of
replacement parts and has said it will explore using other suppliers
to help with production if needed.
Takata has said it would add two production lines at its Monclova,
Mexico plant in January to make replacement air bag inflators.
Workers there have told Reuters that a single line has a typical
quota of around 200 inflators an hour, meaning it could take five
months to make 1 million inflators working around the clock on two
lines, five days a week.
NOT ENOUGH
Auto safety advocates and lawmakers said NHTSA's latest move may
still not capture the scope of the problem, is too late, and may not
be enforceable.
Democratic Senators Ed Markey and Richard Blumenthal said they were
pleased NHTSA recognized the "national scope" of the problem," but
said the call to replace driver-side air bags should be expanded to
also include passenger air bags.
NHTSA agreed in June to allow automakers to do a regional recall and
use their discretion in deciding how and when to notify customers
and replace faulty parts, resulting in confusion for car owners
receiving mixed messages.
Friedman criticized Takata for resisting when NHTSA this week called
on it to issue a defect notification nationwide for air bags of a
certain design. "Takata's initial response was an unwillingness to
move forward, and frankly, that is one of the reasons we are talking
to you today, because I believe everyone needs to understand that
Takata needs to act," he said.
Asked about Friedman's comment, Takata said: "We have been dealing
sincerely with U.S. authorities and ... will continue to do so,
prioritizing customers' safety."
NHTSA also addressed lingering confusion over what exactly makes
some air bags explode. It said it ordered Takata to provide under
oath documents and information on the propellant used in newly
designed air bag inflators, after Takata recently said it had
changed the chemical mix of its inflators.
(Additional reporting by Bernie Woodall in DETROIT, Chang-Ran Kim in
TOKYO; Editing by Karey Van Hall, Sandra Maler, Jim Loney Cynthia
Osterman and Ian Geoghegan)
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