Takata Shares Hit Seven-Year Low as Recalls Grow
January 25 2016 - 12:50AM
Dow Jones News
TOKYO—Takata Corp. shares on Monday hit their lowest level since
2009 after U.S. regulators said recalls involving Takata-made air
bags would expand by around five million vehicles, triggering
concern over wider recall costs.
Takata is meeting auto makers this week and they are likely to
discuss its financial condition, including how to split
recall-related costs that could climb into the billions of dollars,
two people briefed on the matter said.
Honda Motor Co. plans to attend a meeting on Friday during which
Takata will describe its business plans, Honda spokesman Ben
Nakamura said, declining to give further details. Takata said in a
statement Monday it hasn't made a decision on whether to seek
financial aid from auto makers.
Takata shares were trading down about 10% in afternoon trading
in Tokyo. Takata's intraday low of ¥ 579 ($4.89) a share was the
lowest level since March 2009, and the company's market
capitalization has fallen to about ¥ 50 billion ($421 million).
Ten deaths world-wide are linked to the problem of Takata
inflaters exploding with excess force. The latest action by U.S.
regulators raised the number of vehicles recalled over the problem
to more than 24 million in the U.S. Globally, more than 60 million
vehicles have been recalled, Japan's transport ministry has
said.
Despite the recalls, Takata has said it expects to post ¥ 5
billion in net profit in the year ending March. That is because
many of the recall-related payments it is likely to make eventually
aren't reflected on its financial statements.
Auto makers are currently shouldering the costs of recalling
millions of vehicles, pending a resolution between those companies
and Takata on how the burden should ultimately be split. The
companies and Takata have said they would decide once they identify
why the inflaters are prone to exploding incorrectly.
Three separate probes are looking into the root cause. One is
led by Takata and a German research institute, the second by Honda,
Takata's biggest customer, and the third by a consortium of auto
makers that have recalled vehicles over Takata inflaters.
The inflater contains explosives inside a metal casing. It is
designed to release gas to fill the air bag in the event of a
crash. When the inflater explodes with too much force, it shoots
out metal shards that put drivers and passengers at risk.
Analysts have estimated that Takata could face billions of
dollars in recall-related charges. Takata is set to announce its
latest quarterly results on Feb. 5. As of Sept. 30, Takata had ¥
61.7 billion in cash and cash equivalents.
Rival inflater makers Daicel Corp. of Japan and Autoliv Inc. of
Sweden have been producing some of the replacement inflaters in
vehicles that were recalled. Takata said Monday it was in talks
with Daicel over how the two companies could supply inflaters in a
stable manner.
Kosaku Narioka contributed to this article.
Write to Yoko Kubota at yoko.kubota@wsj.com
(END) Dow Jones Newswires
January 25, 2016 00:35 ET (05:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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