Honda Skids Into the Red as Air-Bag Recall Takes Toll

In its latest quarterly report, Honda stated a loss after increasing costs derived from recalls of Takata air bags hindered their numbers. Among car makers, Honda has been the hardest hit, wiping away profits and sending them into the red. Over the past quarter, Honda has allocated ¥270 biBN-NZ969_0513ho_J_20160513022329llion to cover the recall costs of cars equipped with Takata air bags. Despite a fourth quarter with strong vehicle sales, Honda was still unable to stay positive. Honda’s quarterly loss was the company’s first in seven years. The outlook for the company remains positive, however. The company expects to post a net profit of ¥390 billion in the financial year ending in March 2017.

Currently, the auto makers are covering the costs brought on by Takata’s mistake themselves but in the future will work with the airbag manufacturer pending agreement. There is concern that regulators could order further recalls. As of now, Takata is ordered to recall their faulty devices in all cars by 2019. This mandate could affect over 10 million inflaters for Honda. Looking at other Japanese manufacturers, Nissan recorded a ¥90.7 billion charge for its fiscal year related to the recall costs, while Mazda took a ¥40.7 billion charge for the same period.

After our meeting with Hau Thai-Tang at Ford HQ we learned that Ford is not as exposed to the Takata airbag problem compared to other automakers. However, a 2006 Ford Ranger was involved in a crash in late December that killed the driver from an exploding air bag. Since then, Ford has issued recalls which includes over 390,000 Ford Rangers built in North America for driver-side air bags. The Takata air bag issue will continue to reek havoc across the auto industry and affect quarterly earnings for years to come as recall costs are allocated.

Source: http://www.wsj.com/articles/honda-posts-quarterly-loss-as-air-bag-recall-costs-surge-1463125096

 

5 comments to Honda Skids Into the Red as Air-Bag Recall Takes Toll

  • Barrett Snyder

    It is my hope that Takata ends up compensating companies for their losses as a result of the recent recalls. This may not be feasible in the present while Takata struggles to protect themselves against further lawsuits as well as provide replacements for all recalled units. The recent investigation into Takata suggests that they may have known about potential problems for years and decided to cover them up and continue production using the flawed propellant. Ethically this seems a blatant disregard for correct business practices. As a result I feel that the losses manufactures take as a result of Takata’s incompetence fall squarely on the airbag manufacturer. It may not be reasonable to expect this compensation any time soon, but I feel it needs to happen regardless.

  • helgansg18

    I agree. It seems that auto makers are bearing the brunt of the issue. If Takata had known about this problem and chose to not remedy the situation, it is a blatant disregard for correct business practices. My assumption is that these compensations will happen sooner rather than later, but at this time Takata is not in a position to dole out millions if not billions of dollars to those affected.

  • adamsm19

    It was interesting speaking with David’s uncle in Detroit about this very issue. He mentioned that BMW dealers have many unsold cars on their lots that may be affected by the Takata airbag recalls and can not be sold. Perhaps the Takata recall will have a similar impact on Honda dealers in the United States.

  • siegels18

    This problem obviously effects the auto industry all the way from the OEM’s to the dealers and used car lots. I agree that Takata needs to pay for what has happened and I think this must happen through the Japanese government forcing the company to repay all those affected as much as they can. Still it is impossible for them to reimburse everyone affected because of the scale of the problem. I think the ideal solution would be a cheap replacement airbag that could be installed on all affected cars and could be funded partially by Takata and subsidized by the Japanese government for the good of their car industry and for the well-being of drivers.

  • helgansg18

    I do not think that the best way to correct this issue is to mandate a cheap replacement airbag to all the affected cars. While I know you did not exactly mean cheap in regards to the quality of the product, I still think that Takata has to solve this issue correctly by replacing their air bags with a solution that has no chance of defecting again. This would mean a higher quality product that would most likely cost more.