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 billion 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.