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Explosive airbags - and costs

March 30, 2016

Shares in Takata nosedived after a news report said the under-fire airbag maker could face a bill of $24 billion to carry out the industry's largest-ever recall. Takata may have to replace or repair 287.5 million units.

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Honda Airbag Inflator Honda Accord LX
Image: picture-alliance/dpa/J.Kowalsky

Stock in the Japanese auto parts supplier dropped nearly 20 percent shortly before Tokyo trading ended on Wednesday, following a report by Bloomberg News that put the cost of rectifying a potentially lethal airbag inflator defect at 2.7 trillion yen ($24 billion, 21.3 billion euros).

Bloomberg cited a person familiar with the matter as saying the company's worst-case recall scenario would affect as many as 287.5 million airbags, exceeding earlier estimates. So far, about 50 million Takata airbags have been recalled globally, including some 28 million in the United States.

Takata has seen its reputation unravel and nearly half of its stock value evaporate since the beginning of the year after its airbags were found to be deploying too forcefully, spraying passengers with shrapnel and causing at least nine deaths.

One of the obstacles of determining how much the recalls will ultimately cost is disagreement between Takata and its auto maker clients over how to split the bill, according to Bloomberg's source.

One US regulator, the National Highway Traffic Safety Administration, has given Takata until 2019 to investigate the root cause of the overly explosive airbags or to prove that existing units are safe.

For their part, some of the world's best-known automakers conducted their own study and said they had identified the reason behind the defect. Their findings pointed to a lack of water-absorbing chemicals, which allowed moisture to seep into the airbag inflators. That was coupled with poor design and insufficient oversight.

There was also the problem that Takata workers had been loading the volatile propellant used to inflate the airbags into the devices by hand, rather than by machine, increasing the risk of human error.

cjc/hg (AFP, Reuters, Bloomberg)