Saturday, November 29, 2014

Airbag maker faces its 'dangerous bridge'

Airbag maker faces its 'dangerous bridge'     

Kwan Weng Kin | The Straits Times | Sunday, Nov 30, 2014

When Mr Juichiro Takada, the late president of car safety systems maker Takata Corp, heard that his company might be roped in to mass-produce airbags, his first reaction was that it was "too dangerous a bridge to cross".

Honda engineer Saburo Kobayashi, who was in charge of airbag development at the carmaker, recalled in his memoirs that in 1985 Mr Takada said he wanted to withdraw from the airbag development project.

As airbags must be made to a high degree of reliability, Mr Takada felt the business was too risky for his company, which had made its name as a seat belt maker.

"If something should happen due to any airbag component, Takata would collapse. I cannot cross such a dangerous bridge," he told the engineer.

As it turned out, Takata did not leave the project, and Mr Takada finally agreed to build an airbag plant in Japan. Thanks largely to Honda, more than half of whose cars are equipped with Takata airbags, Takata clinched 20 per cent of the global airbag market, becoming the world's second-largest maker, behind only Sweden's Autoliv. But the "dangerous bridge" that Mr Takada was afraid to cross in 1985 has finally caught up with the company, now run by his son, Mr Shigehisa Takada, who is chairman and chief executive.

Over the years, rapid expansion in demand led Takata to move airbag production overseas.

Unfortunately, lapses in quality control at two plants in the United States and Mexico resulted in deaths from exploding metal parts - prompting a massive recall that has so far hit 7.8 million cars in the US alone.

With the American safety authorities having already ordered a nationwide recall, and recalls in other countries also likely, the total figure could exceed 10 million.

At the end of September, Takata held cash assets of 83.3 billion yen (S$918 million) and boasted an equity ratio of 30.9 per cent. But it is expected to have to write off billions of yen in view of the recall, which could leave it about 25 billion yen in the red by March next year, at the end of its current fiscal year.

Mr Shigehisa Takada has vowed in a statement that his company is "committed to the highest standards of safety".

Last year, in an apparent bid to restore the company's reputation, Takata appointed Swiss national Stefan Stocker as president and chief operating officer - the first time that a non-member of the founding family took the helm.

Mr Stocker is no token foreigner. He is fluent in Japanese, having studied in Japan in the early 1980s, and he headed auto parts maker Bosch's operations there from 2002 to 2009.

However, Takata's top management has not appeared in public to address the media directly regarding the airbag problem.

"It is incomprehensible why Takata's top management has not held any press conferences or briefings to explain the situation in their own words," said business daily Nikkei in an editorial.

"When a company is facing a crisis, the company's fate is influenced by how top management behaves," the daily added. Takata's stock ended trading yesterday at 1,292 yen on the Tokyo Stock Exchange, down 4.79 per cent from the previous day's close.

Fortunately for Takata, it is not possible for carmakers to suddenly switch suppliers of their airbags, which are designed to match the characteristics of each car model.

Honda remains Takata's biggest client, owns 1.2 per cent of its stock and is one of its largest shareholders. Takata has 56 plants in 20 countries, including Singapore, and employs 43,680 workers.

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