Takata's airbag defect explodes into global crisis

Tokyo (AFP) - Japanese auto parts maker Takata is facing the biggest test in its 80-year history amid lawsuits, a possible criminal probe, and accusations of "deception and obfuscation" over an air bag defect linked to several US deaths.

The company's shares have plunged as a pair of US senators call for a criminal probe, while the New York Times reported that the world's second-biggest airbag maker covered up the fatal defect for years -- investigators are probing key client Honda over similar allegations.

The problems at Tokyo-based Takata have also laid bare the challenges of a global supply chain. Nearly a dozen automotive clients including Honda, Toyota and General Motors are recalling millions of cars over fears their airbags could improperly inflate and rupture, potentially firing deadly shrapnel at the occupants.

Former Takata employees told the Times that secret tests were conducted a full decade ago to investigate the defect, but executives ordered the destruction of data that exposed design flaws.

The allegations have set off a string of lawsuits over four possible airbag-related deaths, and hundreds of injuries.

"Instead of safely deploying airbags to protect vehicle occupants, the defective Takata inflators...explode, sending metal and plastic shrapnel into the vehicle cabin," said US law firm Hagens Berman, which is involved in a class-action lawsuit against Takata and Honda.

"Rather than take the issue head-on and immediately do everything in their power to prevent further injury and loss of life, Takata and Honda have engaged in a ten-year pattern of deception and obfuscation."

Attention has focused on a Takata plant in Mexico amid suspicions the defect may be linked to a chemical propellant used to inflate the airbags which can more easily rupture in areas with high humidity.

Police reportedly investigated at least one driver death in the US as a murder due to woman's grisly injuries, until their focus switched to the vehicle's airbag.

- 'Tarnished' brand -

The National Highway Traffic Safety Administration (NHTSA), the US auto safety regulator, has expanded its "urgent" warning to owners of cars with affected airbags to take them to dealers to fix the problem.

"Fines from US regulatory organisations are not known at present, but could be significant depending on the outcome of the current investigations," US-based auto analyst Scott Upham said in an e-mail to AFP, as he pointed to Toyota's deal this year to pay $1.2 billion to settle US criminal charges that it tried to cover up deadly vehicle accelerator defects.

Upham also warned of a criminal prosecution of Takata executives if the "allegations of testing data deletion, destroying of test samples and not reporting these issues to the US government are indeed true".

Its brand will be "tarnished in the eyes of Japanese automakers but more impact will be felt from American and European automakers", he added.

Founded in 1933 as a textile company, Takata evolved into an automotive parts giant that started selling airbags in the 1980s and now has dozens of plants and offices in 20 countries, including the United States,China and Mexico.

The airbag division accounts for about 40 percent of its total revenue, which amounted to 556.99 billion yen ($4.88 billion) last fiscal year.

Takata has warned over a bigger-than-expected annual loss, but has kept largely silent on the defect that has plunged the firm into crisis.

Executive vice President Yoichiro Nomura told a Tokyo press briefing last week that the firm "sincerely apologises" for the defect.

But when asked about its seemingly flat-footed public relations response, Nomura said: "We want to make announcements appropriately."

- Long-term damage -

Major automakers have shied away from discussing their future relationship with Takata, but a quick switch is unlikely given the Japanese giant's foothold in the sector.

Still, parts sourcing for the 2019-2020 model years is happening right now, and a Toyota executive last month said the world's biggest automaker wants to replace the defective part "with something of better quality".

"The earnings outlook for Takata looks increasingly unclear owing to the widening recall of the company's airbags, which could lead to a fall in (its) market share in the longer term," Nomura Securities analyst Yohei Ohama said in a report.

Takata's Tokyo-listed shares have lost more than half their value since the start of the year.

Hans Greimel, Asia editor for the Automotive News, said Takata's clients -- many of whom have issued huge recalls in recent years over unrelated defects -- have so far weathered the storm by blaming the airbag supplier.

But "the story is not ended yet, and there are still lots of chapters yet to write," he added.

"If it becomes very clear that Honda was slow to react or hid information, that could impact their image definitely."