Takata Will Take a $235 Million Loss on Air Bag Recalls

Aug 07, 2014 04:30 PM EDT | Jordan Ecarma


Takata has finally revealed its estimated losses on recalls related to faulty air bags that were used in manufacturing millions of vehicles.

The Japanese supplier expects a loss of 24 billion yen, or $235 million, to cover repairs on vehicles equipped with air bags that can explode, Bloomberg Businessweek reported. The company previously forecast a 16 billion yen profit, and it has booked a one-time charge of 45 billion yen in the first quarter to cover the recall expenses.

In a record year for recalls, Takata air bags have been part of a plethora of announcements for brands worldwide. Carmakers around the globe have recalled 6.47 million units this year related to Takata components.

Last April, the U.S. National Highway Traffic Safety Administration described the risk by saying "the inflator could rupture with metal fragments striking and potentially seriously injuring the passenger seat occupant or other occupants," according to The Wall Street Journal.

With Takata's cooperation, the NHTSA has been probing into air bag problems reported in high-humidity areas including Florida and Puerto Rico, where more moisture in the air may make the inflators more likely to explode.

Similar to the General Motors small car fiasco this year, Takata's faulty air bags necessitate serious damage control for the supplier.

"They are going to survive," Scott Upham, president of Valient Automotive Market Research in Rochester, N.Y., told Businessweek in a phone interview. "They will have to go through a period where they are contrite and showing they're doing everything to make things right."

Takata holds about 20 percent of the global market, making it difficult for carmakers to sever ties with the supplier. The air bags have been connected with the recalls of more than 10 million vehicles in the last five years.

The faulty airbag inflators have been connected with six injuries as well as two deaths that were linked to Honda vehicles in 2009. 

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