Takata Profit Drops 33% as Air-Bag Maker Plans Restructuring

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Takata Profit Drops 33% to $20.5M
  • Full-year profit forecast maintained at 13 billion yen
  • Company books 3.5 billion yen charge on air bag lawsuits

Takata Corp., the air-bag maker behind the biggest automotive recall, said quarterly profit plunged by a third as the supplier drafted restructuring plans in the face of billions of dollars in potential costs related to its defective safety products.

Net income fell to 2.07 billion yen ($20.5 million) in the quarter ended in June, from 3.1 billion yen a year earlier, Takata said in a statement Friday. The company booked a 3.5 billion yen charge in the period related to air-bag lawsuits.

The profit drop underscores the difficulties Takata faces as it courts potential saviors. Challenges include dispelling uncertainties surrounding its future, as it’s yet to compensate automakers for the bulk of repair costs and faces a litany of consumer litigation and regulatory scrutiny.

Takata reiterated its belief there’s no material uncertainty about its ability to continue as a going concern while saying it can’t estimate the costs of responding to its air-bag woes. The company maintained its 13-billion-yen fiscal-year profit forecast, which factored in 14 billion yen of recall-related costs, Chief Financial Officer Yoichiro Nomura said in May. New orders for air bags had declined, he said.

Root-Cause Report

Air-bag inflators made by Takata have deployed too forcefully and ruptured, spraying plastic and metal at vehicle occupants. As many as 15 deaths, including 10 in the U.S., have been linked to the malfunctioning devices, which may eventually force auto manufacturers led by Honda Motor Co. to recall more than 100 million air bags globally.

Scientists at the Fraunhofer Institute in Germany have been investigating the root cause of the ruptures. Takata received a report by Fraunhofer in July, which doesn’t specify whether responsibility rests with the supplier or carmakers, according to spokeswoman Akiko Watanabe.

Takata is considering an overhaul of its inflator operations to secure and expand the air-bag business, the company said in May. The third-party panel appointed by the parts maker plans to make restructuring proposals and announce their recommendations in September or October.

Potential Suitors

Both parts manufacturers and buyout firms are expressing interest. Key Safety Systems, the world’s fourth-largest air-bag maker that was recently acquired by a Chinese parts supplier, is said to plan a bid for Takata, while buyout firms including Bain Capital, PAG Asia Capital and KKR & Co. have expressed interest, Bloomberg News has reported.

Takata’s efforts to restructure and secure potential buyers could be complicated by findings of pervasive data manipulation and misrepresentations to automakers. An ongoing audit commissioned jointly by Takata and Honda has found the supplier routinely manipulated results of air-bag inflator tests reported to the carmaker.

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