Takata poised for clash in Congress after rejecting U.S. recall

By Craig Trudell and Jeff Green, Bloomberg News

TOKYO/DETROIT (Dec. 3, 2014) — Airbag maker Takata Corp.'s rejection of demands to recall vehicles across the U.S. sets the stage for a confrontation with members of Congress critical of its response to potentially deadly defects.

Takata snubbed the National Highway Traffic Safety Administration (NHTSA) on Dec. 2 in refusing to expand recalls beyond high-humidity areas, where four motorists have died and about 8 million cars have been called back. The company has said that widening the driver-side airbag safety campaigns would aggravate the shortage of replacement air bags and prolong the wait for repairs.

“NHTSA received Takata's disappointing response to our demand for a national recall of certain driver's side airbags,” Deputy Administrator David Friedman said in an emailed statement. “Takata shares responsibility for keeping drivers safe and we believe anything short of a national recall does not live up to that responsibility.”

NHTSA is not yet advocating a national recall of passenger-side airbags.

Takata's refusal to comply with NHTSA's ultimatum comes as Executive Vice President Hiroshi Shimizu is scheduled to testify today in a second congressional inquiry in as many weeks. Toyota Motor Corp. and other customers have called for independent testing to supplement Takata's investigation and a Mexican regulator urged the airbag maker to take additional safety measures at its lone factory making replacement kits for the U.S.

NHTSA is reviewing Takata's response and deciding on its next steps, Mr. Friedman said. The regulator had told the company that failure to declare a recall of driver's side airbag inflators that was “nationwide in scope” could lead the agency to force a call back and impose fines of $7,000 per violation.

Takata stonewall

“If Takata continues to stonewall on this recall, NHTSA is going to take them to court and their customers are going to leave them in droves,” said Clarence Ditlow, executive director of the Center for Auto Safety, a Washington research group. “I don't see a winning scenario in this for Takata to fight a national recall.”

NHTSA has said Takata's airbag inflators may malfunction if exposed to consistently high humidity by deploying with too much force, breaking apart metal pieces and striking passengers. After four related deaths in Honda Motor Co. models in the U.S., one fatal accident in Malaysia that killed a pregnant woman and reports of inflator ruptures in areas with lower humidity, NHTSA gave Takata an ultimatum last month.

Independent panel

In response, Takata said its airbag testing has found no problems with inflators outside high-humidity areas, according to Hitoshi Sano, head of investor relations for the Tokyo-based company.

Former U.S. Transportation Secretary Samuel Skinner will run a new independent panel that will audit Takata's production and provide recommendations for safer airbag inflators. The company also hired two other former U.S. transportation secretaries as advisers to help overhaul operations.

“Takata remains committed to cooperating closely with our customers and NHTSA to address the potential for inflator rupturing,” Chairman Shigehisa Takada said in a Dec. 2 statement. “We will take all actions needed to advance the goal of safety for the driving public, including working to produce additional replacement units to support any further recalls that may be announced by our customers.”

House hearing

Members of the House Energy Subcommittee on Commerce, Manufacturing and Trade were calling for more action from Takata even before it rejected NHTSA's demand. Drivers were being told they can't get their cars fixed, contributing to rising public anxiety, U.S. Rep. Fred Upton, R-Mich., said in a statement last week.

U.S. Sen. Ed Markey, D-Mass., was among those critical of Takata for refusing to comply with NHTSA's call for a nationwide recall. He interrupted Shimizu during a Nov. 20 hearing when the executive said it was difficult to answer whether it agreed with the demand.

“It is not hard for you to answer yes or no,” he said. After Mr. Shimizu said Takata's willingness to follow NHTSA's directions would be dependent on data that supported the regulator's demand, Sen. Markey responded: “I'm going to take that as no, you do not agree with the decision by NHTSA. And I just think you're plain wrong here, and I think that it's very disturbing.”

Mexico plant

In Mexico, Takata was told to take 171 measures to improve health and safety at its Monclova plant after an Aug. 13 inspection, the nation's labor ministry said in a document dated Dec. 1 and emailed to Bloomberg News on Dec. 2. The ministry didn't elaborate on what measures the company was told to take.

Takata has identified flaws in manufacturing and quality control at the Mexico plant and two U.S. factories that have contributed to its airbag problems. At the Monclova facility, the chemical propellant wafers that lead its devices to deploy were exposed to moisture, raising risk of combustions that break up metal and plastic airbag parts.

Production of airbag replacement kits from the plant will rise to more than 450,000 a month beginning in January, from about 350,000 now, according to Mr. Shimizu's written testimony for today's hearing. The Mexico factory is supplying all of the kits for the U.S. market, he told the Senate committee hearing on Nov. 20.

NHTSA order

Takata said it responded by Dec. 1 to a separate NHTSA order for answers to 36 questions about airbag defects, including on quality control at the Mexico plant, the use of contaminated or improperly formulated propellant and a complete accounting of deaths and injuries. Toyohiro Hishikawa, a Takata spokesman, confirmed the company submitted the answers while declining to give details of the responses.

Toyota on Dec. 2 called for an industrywide independent testing of airbag inflators to supplement what Takata is doing to investigate its devices. The world's largest car maker invited peers affected by the recalls to discuss hiring a yet-to-be named engineering expert to conduct tests and share results with all the companies.

Other auto makers backed the idea, including Honda, Chrysler Group, Ford Motor Co. and General Motors Co.

Nissan Motor Co. has already begun the process of independent testing and welcomes Toyota's decision, said spokesman Steve Yaeger.

Japan's regulators and NHTSA are conducting daily meetings to share information about Takata recalls, Transport Minister Akihiro Ohta told reporters last week. The crisis poses a threat to the reputation of the nation's manufacturing sector, he said during a Nov. 28 briefing in Tokyo.

It's already damaged Takata's reputation among investors, who have pushed the company's stock down 54 percent this year, compared with a 9.8 percent gain for the benchmark Topix index.

__________________________________________________

This Bloomberg News report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.