Takata Air-Bag Report Clears Way for Cost Talks With Carmakers

  • German research group investigated cause of inflator defect
  • Recall costs were estimated at $12.7 billion by Jefferies

Takata Corp. said the German research institute it hired to investigate the root cause of its defective air-bag inflators submitted a report, clearing the way for crucial talks to begin with customers over how to split billions of dollars in recall costs.

The air-bag maker received the report from Fraunhofer Institute in July, spokeswoman Akiko Watanabe said Friday by phone. The report doesn’t specify whether responsibility rests with the supplier or carmakers, she said.

Automakers and Takata plan to hold discussions on how to divide up the recall costs, which are difficult to estimate at this point, the company said in its quarterly earnings statement released on Friday. The cost of recalling all air-bag inflators that don’t use a moisture-absorbing substance was estimated at about 1.28 trillion yen ($12.7 billion) by Takaki Nakanishi, an analyst for Jefferies Group LLC, in a report published in May.

Getting customers led by Honda Motor Co. to agree to shoulder the costs is pivotal to Takata’s plans to restructure itself and find potential buyers, some of which have balked at the uncertainty of liabilities they’d have to take on if they acquired the embattled supplier. The company’s air-bag inflators 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.

To read Bloomberg Businessweek’s cover story on Takata, click here

Takata said net income fell 33 percent to 2.07 billion yen ($20.5 million) in the quarter ended in June, from 3.1 billion yen a year earlier. The company booked a 3.5 billion yen charge in the period related to air-bag lawsuits, but said it can’t estimate the costs of the recalls.

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