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Takata: Exploding end to a scandalous journey

Takata started out as a textile manufacturer more than 80 years ago and in 1960 expanded into the car parts manufacturing business, riding the wave of industrial expansion in Japan. After teaming up with Honda it became a leader in auto safety systems that also served overseas clients.

In the late 80s, the company became the subject of an official investigation due to a reported failure of its seatbelts installed in many Takata-equipped Honda vehicles. The investigation led to the second largest safety recall in US history, affecting 8.9 million cars. Despite knowing about the hazard at least five years before the recall, the company failed to report the problem allowing the affected vehicles to stay on the roads.

In 2014, another safety scandal exploded due to the failing airbag inflators, which were opening with too much force and causing serious injuries, or even death of the car users. It has led to the biggest and unprecedented in automotive history safety recall of 180 million faulty airbag inflators which were putting drivers and passengers at risk.
After initial denial, in 2017 Takata finally admitted to manipulating and withholding key information about the faulty inflators for years, even after they started exploding in people’s cars. It pleaded guilty in the US to a criminal charge and agreed to pay a million dollar fine to the US government, people injured by the airbags and carmakers that used them.

With spiraling debts, in early June 2017, Takata started seeking bankruptcy protection in Japan and the US and its stock plunged more than 65%. Following its bankruptcy, Takata’s business was sold to its US based rival, Key Safety Systems. The company paid $1.6bn for nearly all of Takata’s operations, excluding those relating to the airbag inflators.

There are 34 different auto brands that have had to recall cars to replace Takata airbags. As of 2017, only 35% of affected cars have so far had their inflators replaced in the US alone. The major automakers, which used Takata airbags in their cars, including Honda, Nissan, Toyota and GM, are likely to have to pick up the tab for most of the cost necessary to cover the replacement of the faulty airbag inflators.

The Takata journey started as a joyride but resulted in the collapse of one of the automotive industry’s oldest and most successful suppliers. The company whose business was expected to increase driver safety failed this task epically, leaving the automotive world and beyond buzzing about the massive airbag recall.

Find out more from Market Line Analyst Insight: Takata: Exploding end to a scandalous journey

 

 

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