Takata’s Woes Are Complete: Now Toyota Has Dropped It

November 6, 2015, 9:58 AM UTC
This picture taken on November 23, 2014 shows Japanese auto parts maker Takata's logo being displayed at an event in Yokohama, suburban Tokyo. Toyota said on November 27 the company is expanding a recall of cars with airbags made by auto parts maker Takata which have been linked to driver deaths. The world's biggest automaker said it would recall some 57,000 vehicles globally -- about 40,000 units in Japan and some 17,000 overseas -- while subsidiary Daihatsu would recall about 27,500 vehicles in Japan.Some 16 million vehicles from nearly a dozen automakers worldwide, also including Honda, BMW, Ford and General Motors, have been recalled over the problem. AFP PHOTO / Toru YAMANAKA (Photo credit should read TORU YAMANAKA/AFP/Getty Images)
Photograph by Toru Yamanaka — AFP/Getty Images

Anyone at Japanese auto parts supplier Takata Corp who asked themselves this week ‘how can it possibly get worse?’ got their answer Friday, as Toyota Motor Co. (TM) became the latest automaker to say it won’t use the hapless company’s airbag inflators.

U.S. auto safety regulators earlier this week linked Takata’s (TKTDY) failing inflators to the use of ammonium nitrate as a propellant, prompting automakers from top customer Honda Motor Co (HMC) and Mazda Motor Corp (MZDAY) to say they will no longer fit the product in new cars.

Such ostracism has fanned concerns over Takata’s future, and its shares have fallen 40% this week alone. They’re down nearly 75% since the airbag scandal broke last year.

U.S. regulators believe inflators that use ammonium nitrate can cause airbags to explode with excessive force, spraying shrapnel inside the vehicle. Regulators have linked them to eight deaths, all in Honda cars, triggering the recall of tens of millions of vehicles worldwide.

Takata is the only supplier to use the volatile chemical in its air bags.

The company slashed its annual earnings forecast on Friday, and said it had yet to determine the full impact of a global safety recall.

Takata said it expects a net profit of 5 billion yen ($41.04 million) in the year to end-March, just a quarter of what it estimated three months ago. The Tokyo-based firm booked a combined special loss of 17.2 billion yen for the April-September period to pay a $70 million fine and legal fees.

Airbag products accounted for 38% of its revenue last year, although it’s not clear how much of that is down the inflators themselves.

Takata has said it would phase out ammonium nitrate, which it uses in most of its inflators, by the end of 2018.

Some customers signalled a willingness to continue using Takata’s products as long as they do not contain ammonium nitrate.

Toyota President Akio Toyoda said it would consider other Takata inflators as long as they were safe.

“Even if they’re made by Takata, we intend to take an unbiased approach (on other inflators) as long as we can confirm their safety,” he told reporters on Friday.

Mazda on Thursday said it would drop all Takata inflators containing ammonium nitrate from its new cars. Subaru-maker Fuji Heavy Industries Ltd (FUJHY) and Mitsubishi Motors Corp (MMTOF) said they were considering doing the same.