Air-Bag Maker Takata Faulted on Quality-Control Culture

  • Former U.S. auto regulator issues report on manufacturing
  • Report doesn't address company practices on reporting recalls

Takata Corp. must make quality a part of company culture if it hopes to avoid future safety defects like the exploding air-bags at the center of the largest automotive recall in U.S. history, a review panel appointed by the Tokyo-based manufacturer concluded.

The auto-parts maker needs to better monitor potential safety defects in its products, including establishing teams to track data from incident reports and giving quality-control personnel the ability to halt production when necessary, the independent panel of former government regulators and engineering experts said in a report issued Tuesday.

“Quality needs to be something you breathe every day,” said Samuel Skinner, a former U.S. transportation secretary, who headed the review. “It needs to be a higher priority.”

The panel was assembled by Takata last year to get to the bottom of what went wrong at its factories. Manufacturing flaws are one of the theories for why some air bags have exploded, spraying metal shrapnel at passengers. The air-bag defect has been linked to at least nine fatalities in the U.S. and one in Asia, blamed for more than 100 injuries and forced the recall of 19 million vehicles.

Takata fell 3.3 percent to 563 yen as of 9:10 a.m. in Tokyo trading, headed for its lowest close on record. The shares have plunged 82 percent in the last two years.

In addition to forming review panels, Takata has hired new public relations representatives and reorganized management amid a defect crisis that sent its shares plunging 57 percent in the past 12 months. U.S. regulators are investigating the air-bag inflators that have deployed with so much force that the part breaks and hurls metal shrapnel at the car’s occupants. Sixteen carmakers are now recalling vehicles.

‘Beyond Question’

Takata officials said the company has already thoroughly reviewed the panel’s recommendations, and pledged to act on all of them.

“We understand that the quality of our operations needs to be beyond question,” said Shigehisa Takada, the company’s chairman and chief executive officer. “We are committed to earning back the trust of automakers and the driving public.”

The panel said Takata needs to establish a system for recording and analyzing performance tests. It had relied primarily on safety incident reports from automakers, with no stand-alone program of its own. The report also concluded the company needs to start doing its own research.

Cultural Shift

“It is unlikely that even the most Herculean isolated efforts to improve quality at Takata will succeed unless there’s an accompanying shift in Takata’s culture,” the report said.

Skinner, who served under President George H.W. Bush as transportation secretary from 1989 to 1991 and later as White House chief of staff, said there are “a lot of good people” within the company, and if properly educated, the company’s quality will improve.

Skinner said his panel was designed not to duplicate other efforts seeking to determine the cause of the air-bag failures, like Takata’s internal investigation, a U.S. regulatory probe and another private-industry effort set up by such customers as Toyota Motor Corp. and other automakers.

The panel didn’t look at what caused the air-bag defects, Skinner said. Its charge was to look at the quality of the company’s organization as it stands today.

No Determined Cause

The group instead focused on reviewing design, testing and quality of materials. It also looked at how potential defects are communicated to the highest levels of the company, he said. It was not asked to pass judgment on the design of the airbag inflators and their use of a propellant some suspect may be to blame.

The panel is split between former government officials and business executives. It includes two former heads of NHTSA, Marion Blakey and Dr. Jeffrey Runge. The other members of the panel are Nelda Connors, a former executive with Ford Motor Co. and Eaton Corp.; John Landgraf, an executive vice president with Abbott Laboratories; John Snow, chairman of Cerberus Capital Management and a former U.S. Treasury secretary and chairman of CSX Corp.; and Julio Ottino, dean of Northwestern University’s school of engineering and applied science.

Skinner was assigned in December 2014 to spearhead a review of Takata’s policies, procedures, structure and personnel.

Toyota Model

Skinner patterned the Takata panel on one set up by Toyota Motor Corp. in 2010, following reports of sudden, unintended acceleration. The panel’s work was intended to be completely independent of the company and wouldn’t be approved by Takata before publication, Skinner said.

Toyota is one of the automakers affected by the air-bag recalls. Others include Honda Motor Co., Nissan Motor Co., General Motors Co., Ford Motor Co., and Fiat Chrysler Automobiles NV.

Toyota and other automakers formed an independent testing group to supplement Takata’s investigation. That group is focusing on testing inflators taken out of the affected cars to determine the root cause of what’s causing the air bags to explode.

Takata said last month it’s continuing to conduct tests and ramp up production of replacement kits, as well as trying to raise awareness among consumers about the need to take their vehicles in for recall repairs.

The U.S. National Highway Traffic Safety Administration is continuing to push automakers and Takata to produce parts and fix the tens of millions of affected cars as soon as possible.

$200 Million

NHTSA has said it will take years to complete all of the recalls, and it is prioritizing repairs in areas with high humidity levels, like the states around the Gulf of Mexico and Puerto Rico. Older vehicles and those needing new drivers-side air bags are also higher risk.

In November, the U.S. agency said it would fine Takata as much as a record $200 million over the company’s missteps in handling the air-bag crisis. NHTSA found that Takata had been slow to report the defect and hid critical information from regulators and its automaker partners. Takata agreed to appoint an independent monitor to oversee its recalls and operate under the terms of a five-year consent decree.

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