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 The recall involves passenger and driver-side air bag inflators in
vehicles made by 11 automakers, the U.S. Department of
Transportation, the National Highway Traffic Safety Administration (NHTSA)
and Takata said. It expands on the 16.6 million vehicles called back
for repairs for the same issue in previous regional and national
recalls, and boosts the number of vehicles affected globally since
2008 to more than 53 million.
Regulators on Tuesday linked six deaths worldwide to defective
Takata air bags which exploded too violently and shot shrapnel into
the vehicles.
Takata CEO Shigehisa Takada said in a statement: "We are pleased to
have reached this agreement with NHTSA, which represents a clear
path forward." The company declined to say whether markets outside
the United States would be affected.
It was only under pressure from U.S. regulators that Takata agreed
to the expanded recall. It had previously resisted expanding the
recalls, saying the defect cited by automakers was not "officially
recognized."
Toyota Motor Corp <7203.T>, Nissan Motor Co <7201.T> and Honda Motor
Co <7267.T> had expanded their Takata recalls over the past week.
The automakers have said they decided to proceed with their recalls
after finding some Takata air bag inflators were not sealed
properly, allowing moisture to seep in to the propellant casing.
Moisture damages the propellant and can lead to an inflator
exploding with too much force.
The six deaths linked to the defective air bags have all been in
cars made by Honda, which has borne the brunt of the Takata recalls
to date. Honda gave a disappointing profit forecast last month due
to higher costs related to quality fixes.
Takata shares fell by as much as 12 percent to their lowest in more
than a month in Tokyo on Wednesday, and traded 9.7 percent lower in
the afternoon. Honda shares were flat.
U.S. Transportation Secretary Anthony Foxx said NHTSA also issued a
consent order to Takata, requiring the supplier to cooperate in the
safety agency's probe as well as any oversight.
NHTSA also said it will "organize and prioritize the replacement of
defective Takata inflators" under its legal authority. This is the
first time the agency has used this power since 2000, when Congress
granted it under the TREAD Act.
"We will not stop our work until every air bag is replaced," Foxx
said.
'OWNING UP TO THE CRISIS'
Foxx and NHTSA's new administrator, Mark Rosekind, have been
aggressive in tackling auto safety issues. On Monday, NHTSA
escalated a regulatory battle with Fiat Chrysler Automobiles <FCHA.MI>,
saying it could impose "multiple penalties" on the automaker and
order a public hearing to examine the automaker's handling of 20
recalls affecting more than 10 million vehicles.
NHTSA had slapped Takata in February with a $14,000 per-day fine for
failing to fully cooperate with a probe, but Rosekind said that was
now suspended.
Takata's recall will cost the supplier and its automaker customers
an estimated $4-$5 billion, said Scott Upham, president of Valient
Market Research, which tracks the air bag industry.
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Takata has said it expects to return to profit this financial year,
but its chief financial officer told analysts last week it would not
set aside more cash to pay for the expanding recalls.
Last November, sources told Reuters that bankers with relationships
with Takata were brainstorming financing proposals, although not
directly with the supplier. Raising new capital could threaten the
control of the Takada family, but potentially boost governance and
oversight.
The Takada family holds about 59 percent of the world's
second-largest air bag inflator maker.
"TAKEN FAR TOO LONG"
A Honda spokesman had no immediate comment on how the replacement
air bag inflators will be produced for such a large number of
vehicles. Industry officials have turned to Takata's rivals for help
in obtaining replacement parts.
Takada, whose family founded the supplier, said analysis of the
problem "was not within the scope of testing specifications" set by
its automaker customers.
"While it's taken far too long, Takata finally seems to be owning up
to the air bag crisis that has plagued vehicles of all shapes and
sizes," said Kelley Blue Book analyst Akshay Anand. "A recall of
this size is unprecedented in any industry."
U.S. lawmakers, who had pushed for a broader recall, welcomed the
news.
"Folks shouldn’t have to drive around wondering if their air bag is
going to explode in their face," Florida Democratic Senator Bill
Nelson said. "Let’s hope Takata’s admissions today tell us the whole
story."
Takata faces multiple class actions in the United States and Canada
as well as a U.S. criminal investigation and a regulatory probe.
Tuesday’s announcement will "tremendously bolster our claims," said
Peter Prieto of law firm Podhurst Orseck, who leads the group of
plaintiffs’ lawyers appointed to oversee the U.S. cases. Those cases
have been consolidated in federal court in Miami.
(Additional reporting by Jessica Dye in New York, Radhika
Rukmangadhan in Bengaluru and Chris Gallagher in Tokyo; Editing by
Simon Jennings, Matthew Lewis and Ian Geoghegan)
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