Takata Jumps Most on Record as Firm Predicts Return to Profit

  • Restructuring panel expected to make proposals by October
  • Takata-hired firm may release root cause findings this summer

Takata Corp. shares surged by a record after forecasting an annual profit despite being on the hook for potentially billions of dollars in costs related to its defective air bags that have yet to be apportioned.

The Tokyo-based manufacturer jumped as much as 24 percent in intraday trading after predicting it will make a profit of 13 billion yen ($119.6 million) for the fiscal year ending March. The company had a 13.07 billion yen deficit the preceding period. There’s no serious funding concern or material uncertainty over itself as a going concern because the company will take steps including cutting costs, selling non-core businesses and overhauling its inflator business, Takata said in a statement.

Takata air bags have deployed too forcefully, rupturing and spraying parts at vehicle occupants. At least 13 deaths in the U.S. and Malaysia have been linked to the malfunctioning devices, which have forced auto manufacturers led by Honda Motor Co. and Toyota Motor Corp. to recall more than 60 million air bags globally.

The company’s fate remains unclear with mounting recall costs and compensation to drivers. The total number of air bags called back may rise to 118.5 million worldwide, as markets including Japan follow last week’s latest order by the National Highway Traffic Safety Administration, Takaki Nakanishi, a Tokyo-based analyst for Jefferies Group LLC, wrote in a May 5 report.

An expansion of that magnitude may cost an additional 665.4 billion yen, according to Nakanishi, who was ranked as the top Japan auto analyst by Institutional Investor from 2003 to 2009 and again in 2013. The company has said that it can’t measure the impact of costs until the root cause of the defect has been ascertained and the blame assigned. The Takata-hired researcher Fraunhofer may release its findings this summer, Chief Financial Officer Yoichiro Nomura said.

As of March, Takata’s cash stood at 53.7 billion yen, down from 60.8 billion yen in the previous quarter. The company has begun to seek financial sponsors that would replenish its capital and allow it to emerge as a new company, a person familiar with the matter said in April.

Restructuring Plans

Takata is considering an overhaul of its inflator operations to secure and expand the air-bag business, according to the statement. The third-party panel appointed by the company will come up with restructuring proposals and announce their recommendations in September or October, according to the company.

Takata has factored in 14 billion yen of recall-related costs in its financial forecasts for this fiscal year, Nomura said at a press briefing after the earnings announcement in Tokyo on Wednesday. New orders for air bags have declined, he said.

The air-bag maker reported a net loss of 13.1 billion yen in the fiscal year that ended March, compared with an initial projection for a 5 billion yen profit. The company posted a loss of 29.6 billion yen a year earlier. The company won’t pay a year-end dividend for the 12 months ended March.

Takata’s shares rose 2.5 percent to 323 yen in Tokyo trading before the company announcement, while the benchmark Topix Index was little changed.

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