As we discussed in class yesterday, the recall of Takata airbags has proven to have an immense effect on the auto industry by rendering several million cars unsellable and several million others unsafe. With nearly 64 million airbags recalled in the United States alone, the Takata airbag recall is the largest recall the US has ever seen. After careful testing, scientists revealed that the cause of the airbag defect is exposure to moisture and temperature fluctuation over time. The propellant chemical/gas is extremely volatile and cheap, and it is now clear that Takata tried to cut corners and coverup evidence that the airbags might be unsafe as early as 2000. 11 deaths later, 10 of which have occurred in the US, Takata is facing severe repercussions, especially when it was discovered that Takata performed testing of old airbag inflators retrieved from junkyards and found that 2 of the tested airbags did not pass the testing. The data was promptly destroyed, and Takata deliberately continued to deceive the public and skirt around safety regulations. So why did it take the public so long to react to the airbag recall? Some 4000 airbags were recalled in 2008, but confusion and lack of communication hindered the investigation. Now, 8 years later, the ramifications are even greater and valuable time has been lost, not to mention the unbelievable amount of unstable cars on the road and in dealership lots.
Source: http://www.nytimes.com/2016/05/05/business/takata-airbag-defect-recall.html?ref=automobiles&_r=0
With that many affected cars, each with multiple air bags, I can only wonder how Takata goes about fixing the problem. It seems like the scale is too large for them to be able to recall and replace these bags on time. Takata controls 3% of the airbag market, where the largest company in the industry, Autoliv, controls 40%. With this extreme fault it seems like a possibility for Takata to go under and it’s 3% market share will be eaten up by competitors.
https://www.outsource2india.com/kpo/pdf/airbag-industry-report.pdf
Although this recall is defect is very unfortunate and the deaths that it has caused are tragic, I can’t help but think it might cause a positive externality. This is because so many cars have these airbags, but no one using a car with these airbags knows if theirs will have this defect. Because of this, I think that people using these cars might be influenced to drive safer out of fear of having a defective airbag (even though the chances are so low). If anyone sees flaws in this logic let me know.
I wonder if this recall will prompt investigations into the practices of Takata’s competitors? Also, I agree with Nate that this could prompt a Takata exit from the airbag industry.
Unfortunately Takata’s recalls have surpassed their production ability to replace the recalled units as they are already operating at close to maximum capacity. The result is that it’s practically impossible to “fix” the problems with replacements. Refusing to sell these defective vehicles across the board is not a viable option as it would bring the auto industry to a virtual halt. Mass panic has yet to occur because the story is largely ignored by any mainstream media outlets. If widely broke, the story could effectively render the affected vehicles worthless as the large majority of the public will be afraid to drive them, and no one will want to re-purchase them. This carries important implications for the used parts business which could potentially see a huge drop in sales due to a large majority of vehicles no longer viable to sell parts for.
This is a generic supply chain issue: Takata is too big to fail in the short run, because their product is application-specific, so that you can’t use something produced by another firm, and there is also limited industry production capacity.
Takata has only 3%??? Perhaps, but there are over 100 million Takata airbags on the road.
On the technical side, it is clear that Takata covered up evidence, but it’s not clear that they “cut corners”. Yes, the propellant is cheaper, but that’s part of a larger set of cost and engineering tradeoffs, and (if I’m not mistaken) they’ve used this propellant for over 2 decades. Remember that there are less than 20 fatalities, though a larger set of known exploding inflators, call it 100 total. Out of an installed base of over 100 million, that’s a 1-in-a-million failure rate (and perhaps a little less). They did not cut corners in a way that led to widespread problems, they made an engineering decision long ago that led to very rare problems, and even that is not a certainty as the evidence of actual failure modes is destroyed in the incidents where the inflator fails.