Coverage: Toyota drops Takata, joins other automotive companies

Bad news for Japanese airbag-maker Takata continues to pile up. Toyota joined the growing list of carmakers who are dropping Takata’s airbags after U.S. regulators found Takata’s use of ammonium nitrate in its inflators could lead to deadly effects.

Jonathan Soble of The New York Times had details about the company’s announcement:

The president of Toyota Motor said on Friday that his company would drop the embattled safety equipment maker Takata as a supplier of airbag inflaters, after a similar move by Honda, a decision that widens the fallout from the largest auto safety recall in history.

The president, Akio Toyoda, said at a news conference that Toyota was “placing top priority on ensuring the safety and confidence of our customers.”

“Going forward, we will not use Takata airbag components that use ammonium nitrate,” he said, referring to a propellant in the inflaters that some specialists say can destabilize, in extreme cases causing the device to explode and send metal fragments shooting into the vehicle. Eight deaths and more than 100 injuries have been linked to the defective inflaters.

Fortune discussed the possibility that Toyota might still use Takata airbags, just not ones made with ammonium nitrate:

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 and Mitsubishi Motors Corp said they were considering doing the same.

Kana Inagaki of The Financial Times explained how Takata is handling the automotive boycotts:

Takata faced fresh investor questions about its prospects to weather an escalating safety scandal after Toyota, the world’s biggest car group, joined the boycott of its airbag inflators.

Yoichiro Nomura, Takata’s chief financial officer, insisted its financial health remained robust even as the Japanese car component manufacturer reported a quarterly loss of $71m and slashed its annual guidance on mounting recall costs.

“I can clearly say that we are OK in terms of financing,” Mr Nomura said, pointing to its ability to generate cash flows.

Takata’s shares have fallen 40 per cent this week after a US safety regulator said on Tuesday it believed the company’s use of an ammonium nitrate-based propellant in its inflators was a factor in the equipment exploding. These ruptures have been linked to eight deaths worldwide and at least 100 injuries.

“Investors are completely lost now since we don’t know where Takata’s business is going,” said Naoki Fujiwara, a Tokyo-based fund manager at Shinkin Asset Management.

“Unless Takata can find new channels to sell its products, the company’s survival is at risk,” Mr Fujiwara added.

For the July to September quarter, the company reported a net loss of Y8.6bn ($70.5m) compared with a profit of Y3.4bn in the same period a year earlier. It also lowered its net profit guidance to Y5bn for the fiscal year through March 2016 from its earlier projection of a Y20bn profit.