Japan’s Takata drops after US lawsuits over air-bag defect

29 Oct 2014 | Author: | No comments yet »

AutoNation Halts Sales of Used Cars Under Takata Recalls.

DETROIT (AP) — The head of the nation’s biggest car dealership chain says it won’t sell used cars being recalled for exploding air bags due to conflicting advice from automakers and lack of direction from the government.BEIJING/TOKYO: Japan’s Takata Corp, whose potentially defective car air bags have been linked to four deaths in the United States, is unlikely to be dumped by its automaker customers given the cost and disruption of such a move – for now.

DETROIT (Reuters) – AutoNation Inc (AN.N), the largest U.S. auto retail group, has stopped selling cars equipped with Takata Corp (7312.T) air bags involved in a massive global recall involving more than 16 million vehicles, Chief Executive Mike Jackson said on Tuesday. “We as a company have made the decision not to retail any vehicle that is involved in this recall until it is repaired and the vehicles that do come in for service, we are advising the customer not to put a passenger in front of that air bag until it’s repaired,” Jackson said in an interview with Reuters. A record number of vehicles — more than 50 million — have been recalled this year, a result of congressional hearings and Justice Department prosecutions, which exposed a mass of deadly defects that the auto industry had concealed. From the Ford Explorer rollovers in the 1990s and Toyotas’ issue with unintended acceleration in the 2000s to the recent fatal consequences of defective General Motors ignition switches and Takata airbags, the auto companies hid defects to avoid recalls and save money. The move comes amid complaints of uneven recall and safety campaigns by auto makers to deal with the 7.8 million older cars containing air bags that can explode with too much force during a crash, spraying drivers and passengers with metal and plastic debris. “We have a very difficult situation on our hands,” AutoNation Inc.

But over the coming few years, as the next new models are designed and built, loyalty to Tokyo-based Takata, the world’s No2 safety equipment maker, is likely to be tested. “Takata’s not going away,” said Scott Upham, a former executive at Takata and at third-ranked TRW Automotive Holdings Corp and now president of Valient Market Research. “In traditional Japanese fashion, they’re going to take their lumps, be contrite and quiet about it, and try to make it up to Honda and the other automakers over time.” Takata has a strong enough cash position to weather the crisis so far, and there is no sign that carmakers would, or could, quickly abandon the company, industry officials say. These and other major defects were first exposed by safety advocates who petitioned the government and by reporters in the tradition of Bob Irvin of The Detroit News, who wrote over 35 articles on Chevrolet engine mounts until General Motors agreed to recall 6.7 million vehicles in 1971. Vetting the safety of a new air bag design is time-consuming and costly. “There’s no alternative inflator producer with enough idle capacity to replace Takata quickly,” said a person with knowledge of the matter. “Over the shorter term, no automaker would be able to do that without causing huge disruptions in production.” Takata’s finances could, though, be stretched further if an existing US recall of some 7.8 million cars is made nationwide – as called for by three Democratic senators. That could mean an additional 5.3 million cars to fix, according to Reuters calculations based on data from the carmakers and the US National Highway Transportation Safety Administration (NHTSA), ramping up the costs and making it the industry’s biggest recall in three decades.

Takata and auto-safety regulator National Highway Traffic Safety Administration have indicated the air bags are most vulnerable in hot, humid climates. The company may book a quarterly charge of 2-3 billion yen to cover the cost of additional recalls of vehicles fitted with potentially defective air bags, two people familiar with the matter said on Monday. In order to prevent the risk of death or serious injury, Congress empowered the agency to oblige auto companies to use alternate suppliers and independent repair shops to manufacture parts and make repairs to expedite a recall fix.

Department of Transportation Secretary Anthony Foxx said at a workshop in New York that he has asked the DOT inspector general’s office to review NHTSA’s handling of the Takata issue. “I’ve also asked our team to do a due diligence review,” Foxx said. “I make no apologies for taking a look at our safety posture as an agency. Yet the N.H.T.S.A. has never used this authority — even though it took General Motors from February to October to get enough parts to dealers to repair all the recalled ignition switches. It’s like a check up, and I think it’s a good practice for us to do.” He said one automaker advised dealers to tell consumers to continue to drive the car because the chance of an incident was rare. Only after a lengthy delay was the agency prodded, in 2009, into opening an investigation into whether the first two Honda recalls of Takata airbags were adequate.

However, NHTSA has argued a blanket, nationwide recall could complicate things and “would divert supply of air bags from those areas at demonstrated risk.” In part, the urgency of repair warnings coupled with a focus on cars registered in a handful of states has car dealers like Mr. The industry needs to sit down and talk about standardizing the recalls, Jackson says. “I think there needs to be a process when a component fails across multiple manufacturers, that there’s a coherent, coordinated recall effort. Another said that in cases where the passenger-side air bag is potentially defective it should be disconnected, with no one allowed to sit in the passenger seat until the air bag is fixed. Although the agency asked tough questions, it quickly closed the investigation after Takata hired a former senior N.H.T.S.A. official to represent the company.

On Monday, consumers filed a proposed class action suit in Florida against Takata and several automakers including Honda Motor Co (7267.T) and Toyota Motor Corp (7203.T), claiming the companies defrauded them by concealing crucial information. NHTSA could increase the makes and models subject to recall, given that Takata’s manufacturing problems go beyond what the company has disclosed to regulators about why the devices are at risk of exploding dangerously, according to internal company documents reviewed by Reuters. So far NHTSA says it hasn’t found problems outside of the following areas: Florida, Puerto Rico, limited areas near the Gulf of Mexico in Texas, Alabama, Mississippi, Georgia, and Louisiana, as well as Guam, Saipan, American Samoa, Virgin Islands and Hawaii. Takata, which started out making textiles in the 1930s, has 30 billion yen ($278 million) of bonds due in 2017-21, and 40 billion yen in outstanding loans, according to Thomson Reuters data. In a statement, the agency said it is still investigating the “full nature of the defect,” but because air bag replacement parts are limited, it has asked car companies to focus repair efforts on Florida, other Gulf Coast states and U.S. territories.

Glassman and Paul Jackson Rice, who all served as chief counsel to the agency — have gone on to become consultants, lawyers or expert witnesses for auto companies. Under an agreement with NHTSA officials earlier this year, Takata said it “would not be expected to admit that its products contain such a defect” and the same applies for its auto maker customers, according to documents filed with the agency. Karl Brauer, a senior analyst with Kelley Blue Book’s KBB.com, owns a Ford GT but lives in California—outside the region where Ford has said it would to conduct repairs on the car.

Although Congress has given the N.H.T.S.A. regulatory tools that the agency failed to use, Congress has not given it the two things it needs most: sufficient funding, and the power to bring criminal penalties against auto companies. Since the National Traffic and Motor Vehicle Safety Act was enacted in 1966, the industry has blocked any meaningful provision for criminal penalties that would make company executives who concealed defects or decided not to recall dangerous vehicles subject to prison sentences. Only a complete overhaul of the agency’s culture will prevent future recalls, since automakers will always place sales and profits over safety and innovation. All auto companies should have an independent, government-certified safety ombudsman to investigate complaints from whistle-blowers and to report defects directly to the chief executive and the agency.

They must demonstrate that they see auto companies as an industry to be regulated, rather than partners whose profits and sales must be protected at the public’s expense.

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