Takata Corporation, the world’s largest airbag manufacturer and supplier, is expected to announce Wednesday, May 3rd, that it is recalling an additional 35-40 million airbags. This announcement would come in addition to Takata’s recent recalls from 14 automakers that include 24 million U.S. vehicles and 28.8 million inflators. All of these inflators contain propellant that causes the airbag to deploy with too much force and rupture its metal container. Ruptured containers have been linked to 10 deaths and more than 100 injuries due to metal shards sprayed at the occupant on airbag detonation. Takata entered into a consent order with NHTSA in November allowing the regulatory authority the power to issue additional recalls. This agreement required Takata to recall all airbags using ammonium nitrate propellant, the chemical linked to airbags deploying with too much force. However, if Takata can prove this propellant is safe by 2019, the recall will not be all-encompassing. Today’s recall expansion announcement leaves open the question of whether 50 million inflators will eventually be recalled. The possibility of these rapidly expanding recall costs has forced Takata to search out a potential financial backer in the event of bankruptcy.
Source: http://www.autonews.com/article/20160503/OEM11/160509961/takata-poised-to-recall-another-35-40-million-u-s-airbag-inflators
Takata’s major recall of airbags highlights the recent news of major automobile manufacturers being caught with sub-regulation standards for their vehicles that require major recalls. Takata is just one of many major companies that have cut costs on their parts by reducing their safety standards and will now be punished by the U.S. Department of Transportation’s National Highway Traffic Safety Administration for their lack of correlation with industry regulations. I would be interested to see whether Takata moves towards bankruptcy with this major recall of vehicles with their faulty airbags.
This is not so much cost-cutting as a different technical approach taken by a firm that begin from the cut-and-sew end rather than the pyrotechnics end of making airbags. We talked about this some in class.
What model years are impacted by this recall? What is disconcerting about a defect in a part like an airbag is that it may not be detected until the airbag is deployed. Given the possibility for 50,000 additional recalls this could be an issue several years into the future, especially if the propellant linked to the defects is retained after 2019.
This is not the first time they have dealt with this problem in the last year. They have been struggling with this issue since early November and it has caused the stock to fall 1,000 points in six months from 1,373 on November 2nd to 373 on May 2nd. While Takata will not be able to cover the expenses for the recalls, they have a saving grace in the Japanese automakers since they have become increasingly dependent on Takata safety products. It will be interesting to see how all of these recalls will shake up the earnings for the auto industry as a whole, given how widely Takata’s products have been used.
Put this in the context of a huge number of recalls for everyone. Cars are (i) much more complicated while (ii) being kept longer. It’s very easy to get blindsided by a seemingly innocuous change in materials (the Toyota sticky gas pedal issue), which could be a subtle change in how a chemical company supplying a Tier II supplier makes their resin. It can be designs that are good but that interact with other parts in a way no one foresaw (missing the shifting of some other part that doesn’t touch yours so was ignored but changes the temperature or vibration of your part). More vigilant regulators add to the risk, and it may be that management information systems make gathering data easier, while the prevalence of supplier modules mean that the 1-in-a-million error is occurring not in a 400,000 vehicle production environment but in a 30 million vehicle one (as with Takata).
In the past no one would have ever known about many of today’s problems.