Photographer: Luke Sharrett/Bloomberg

Honda Profit Misses Estimates as Takata Air Bag Recalls Mount

  • Carmaker meets Takata as supplier's CEO pressured to step down
  • `Takata-related costs remain unclear,' Jefferies analyst says

Honda Motor Co., the biggest customer for troubled air-bag supplier Takata Corp., reported profit that missed analyst estimates as costly recalls to replace the devices expand.

The automaker posted net income of 124.2 billion yen ($1 billion) in the quarter through December, according to a company statement. That compares with the 149.3 billion yen average of eight analysts’ estimates compiled by Bloomberg. The company maintained its forecast for profit to rise to 525 billion yen for the fiscal year ending in March.

Honda calling back more than 20 million vehicles to fix Takata-made air bags has distracted from the company’s business results, with recalls expanding further this month. The carmaker is shouldering costs as investigators determine the root cause behind a defect linked to 10 deaths in its vehicles. Takata’s devices have ruptured and injured about 100 more motorists in the U.S. alone, increasing Honda’s quality-related expenses.

“Although there are signs of improvement in earnings, the uncertainty over the quality issue cannot be wiped out,” Takaki Nakanishi, an analyst at Jefferies Group LLC, wrote in a report this month. “Future prospects of Takata-related costs remain unclear.”

Honda, which owns 1.2 percent of Takata, was among automakers that met with the supplier today to discuss the state of its business. Representatives for the companies declined to discuss details, including whether President Shigehisa Takada is preparing to resign.

Takata, Honda and a consortium of automakers in the U.S. including Toyota Motor Corp. are backing the investigations into the root cause of the air bag ruptures. Those efforts will determine how much Takata will contribute to paying recalls that have already cost automakers 600 billion yen to 700 billion yen, a person familiar with the matter said earlier this week.

Automakers will be more receptive to supporting Takata if management takes responsibility for the recalls and resigns, people familiar with the matter have said, asking not to be identified discussing internal deliberations.

Frustrations have risen as automakers approach the eight-year mark since Honda began recalling vehicles to replace Takata air bag in 2008. The crisis spread this week, with the supplier reporting an 11th death involving its inflators. One of the devices ruptured in April when the driver of a 2007 Honda Civic in India crashed and the vehicle rolled over. The cause of death hasn’t been determined, Honda spokesman Ben Nakamura said this week.

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