Photographer: Tomohiro Ohsumi/Bloomberg

Takata Sets Aside $189 Million for Air-Bag Recall Costs

  • Auto supplier to book charges for year ended in March
  • Provisions don't include cost of recalls still under probe

Takata Corp. raised provisions for its air-bag recalls that involve more than a dozen auto manufacturers, after denying reports that the biggest safety crisis in the industry’s history will expand further.

The auto parts supplier will book a combined 20.1 billion yen ($189 million) in charges, 16.6 billion of which was decided after reviewing air bag recall costs, according to a statement on Monday. The remaining 3.5 billion yen charge is related to settlements with consumers injured by the devices.

Takata plunged by the most in a month after the Nikkei newspaper reported that U.S. regulators plan to call for expanded recalls. The shares fell 9.2 percent to 373 yen at the close in Tokyo, dropping its market capitalization to about 31 billion yen.

The National Highway Traffic Safety Administration has told carmakers that recalls will widen to all vehicles with air bags lacking a moisture-absorbing desiccant that keeps the devices from deteriorating, the Nikkei reported Saturday, citing unidentified sources. There are more than 100 million such vehicles worldwide, the newspaper said.

Takata issued a statement saying it is in discussions with NHTSA though there has been no decision on expanding the U.S. recalls.

NHSTA spokesman Bryan Thomas said Monday in Washington that the media reports about NHTSA preparing to expand the recalls are “incorrect.”

“NHTSA is reviewing the findings of three separate investigations into the Takata air-bag ruptures,” Thomas said. “The agency will take all appropriate actions to make sure air bags in Americans’ vehicles are safe.”

The air-bag maker has lost more than half of its value this year.

Rupturing Inflators

Takata inflators that can deploy too forcefully, rupture and spray plastic and metal shards at vehicle occupants have already prompted more than a dozen auto manufacturers to recall at least 60 million air bags worldwide. The defective components are linked to the deaths of 10 motorists in the U.S. and a pregnant woman in Malaysia in 2014. A fatal accident involving a Honda Civic driver in India last year also is under investigation.

A researcher hired by a coalition of automakers said in February that moisture seeping into Takata’s inflators was determined to be the reason the air bags may rupture. Several other investigations are still under way, and challenges with determining root cause have held back automakers and the supplier from deciding how the companies will divvy costs.

Cash Outlook

The latest charges for Takata don’t include costs related to recalls that are still under investigation, according to the statement. The company said it’d already booked 2.6 billion yen in settlements during the nine-month period ended in December. The air-bag supplier is scheduled to report earnings for the fiscal year ended in March on May 11.

Takata has estimated cash and equivalents may drop 24 percent to 49.7 billion yen by the end of March 2017 if recalls continue at the current pace, a person familiar with the matter said last month. Takata is seeking sponsors that would replenish its capital and allow it to emerge as a new company, said the person, who asked not to be identified because the internal forecast and search are confidential.

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