Things aren’t looking so rosy for Takata, a Japanese auto parts manufacturer embroiled in a massive scandal about its deadly exploding airbags.
Shares have been in free fall all week, extending losses to a staggering 43% for the year. The company’s earnings have plunged into the red — on Friday, Takata announced a net loss of 5.6 billion yen ($46 million) in the most recent quarter.
Toyota, the world’s biggest automaker by sales, said Friday it would no longer use Takata products containing ammonium nitrate — a component the airbag maker has agreed to phase out because it is believed to have caused the violent explosions.
Takata’s biggest customer, Honda, dumped the supplier earlier this week. Other major automakers, including Mazda and Mitsubishi, are following suit.
It’s all widening fallout from a scandal that’s been brewing for a decade. Airbags made by the company have been known to explode when they inflate, firing out shards of metal, causing injuries — and even deaths — at the wheel. Victims look like they’ve been shot or stabbed, according to police reports responding to alleged Takata-related accidents.
At the heart of all this is a truly massive consumer safety scare that’s chipped away at public confidence in the company. Along with its financial woes, the big question now is: Can Takata still survive?
Experts say Takata mishandled the situation right from the start. Major executives were silent on the issue until June, when the CEO apologized for deaths and injuries caused by its exploding airbags, and for failing to explain the situation to the public sooner.
Since then, the company has still largely remained out of sight. This week, Takata held a rare news conference after getting slapped with a huge $70 million regulatory fine in the U.S., but didn’t admit wrongdoing, saying it was confident in its airbags.
Takata CFO Yoichiro Nomura even defended the company after posting a quarterly loss.
“There is absolutely no problem with our finances — I can clearly say we are fine,” Nomura said.
But as Takata’s customers stop buying its airbags, the company could fall deeper into trouble. At the same time, because the company produces about one quarter of the world’s airbags, automakers may have difficulty finding enough substitute suppliers.
A shortage of replacement parts has already plagued recalls involving Takata airbags.
The company is under a criminal investigation by the U.S. Justice Department — the outcome of which could mean even more cash penalties, and possibly jail time for executives.
It wouldn’t be the first time. In 2013, three Takata executives agreed to plead guilty and serve prison sentences in a conspiracy to fix prices of seat belts sold in the U.S.
Takata also faces a number of potentially costly private lawsuits over its airbags.
While many of the airbags in question were made at a mismanaged Mexico plant, the fallout could spread far beyond.
Japan’s auto industry supports a number of other sectors, including steel, rubber and chemical manufacturers.
–Junko Ogura and Yoko Wakatsuki contributed to this report.
