Takata Announces New Recall, Endures Sizable Financial Hit
The recall affecting millions of vehicles equipped with defective Takata airbags has reportedly more than doubles to 34 million cars, with the potential to severely thin out the company’s finances as it simultaneously deals with multidistrict litigation.
Friday, May 22, 2015 - The number of vehicles with defective airbags recalled by the automotive manufacturer Takata Corporation has ballooned to 34 million, double the number of cars included in the recalls leading up to the most recent announcement. In addition to the potentially crippling ramifications of the latest recall, Takata is in the midst of multidistrict litigation related to the airbag issues. Plaintiffs have claimed that Takata had been aware of the dangerous defects in their airbags as early as 2008, but did not disclose those details in efforts to continue to sell the parts.
The malfunctioning airbags, which have led to dozens of injuries and multiple deaths, is seriously threatening the long-term financial health of the automotive parts manufacturer. The company‘s stock has fallen over 10 percent in the last week in the wake of the expanded recall news. Early estimates have put the price tag of Takata‘s projected recall costs at more than $2 billion. Questions have risen in relation to Takata‘s ability to survive such a severe and widespread problem. These costs do not include potential damages to be awarded in the pending MDL against Takata.
According to the claims filed by plaintiffs in the MDL, the defective airbags manufactured by Takata are susceptible to ripping open when activated. This results in debris bursting from the vehicle with the potential to seriously injure and even kill passengers. More than 100 passengers have been injured as a result of the airbag defects, with 6 deaths being reported to date.
Though the most recent announcement is expected to affect millions of vehicles, automotive companies must first investigate which of their automobiles should be included in the recall before identifying which one are susceptible to the airbag problems. Among the first to do so publicly are Mazda and Mitsubishi, which announced they will enact a new reall that will affect over 600,000 vehicles combined.
The latest announcement is the first time that Takata has publicly acknowledged its role in the airbag malfunctions. The company addressed multiple issues related to the design of the airbags that caused them to defectively deploy. One such cause was linked to the effect humidity has on the propellant in the airbags. The moisture from the humidity contributed to the degrading of the propellant, resulting in it burning too hot and tearing the airbag open upon firing. This allowed metal parts within the airbag to fire out into the vehicle. A large proportion of lawsuits against Takata have come from places like Florida and Puerto Rico where naturally high levels of humidity have led to many airbag incidents.
Takata also acknowledged a previously undisclosed contributor to the airbag malfunctions, as parts of the inflators were susceptible to leakage. This allowed moisture to seep into the airbags, allowing for the same degradation and subsequent over firing to occur that compromised the airbags exposed to high levels of humidity.
The latest recall will affect nearly one in seven cars on the streets in America. Takata will look next to automobile manufacturers to find out how much of the recall bill they may be willing to foot, which could prove vital to the long-term viability of the company. There are no indications thus far however that Takata will be forced into bankruptcy, which would eliminate its ability to pay out damages.
