8 MIN. DE LECTURA
BEIJING/TOKYO, Oct 28 (Reuters) - 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.
Some business is leaking to rivals, but the industry doesn't have the spare capacity to make a significant dent in Takata's contracts. But over the coming few years, as the next new models are designed and built, loyalty to Tokyo-based Takata, the world's No.2 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. Air bags are built into a car's design and can't simply be replaced by another make. 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 U.S. 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 U.S. National Highway Transportation Safety Administration (NHTSA), ramping up the costs and making it the industry's biggest recall in three decades.
Takata has said it set aside 75 billion yen ($690 million) for recalls, enough to cover up to 9 million cars. 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 the event of a national U.S. recall, Takata would not be able to carry out that many fixes in a timely manner as it doesn't have enough inflators in stock or the capacity to carry out that scale of action - though some of those cars may already have been scrapped. "There would be long, long lines of customers at car dealers waiting to get their cars taken care of," said one of those who attended a Takata briefing.
More than 16 million vehicles globally have been recalled for defective Takata air bags since 2008, the bulk of them built by Takata's biggest customer, Honda Motor Co. In some instances, air bags have exploded with dangerous force, shooting shrapnel into the car.
The U.S. House committee looking into the defective air bags made by Takata will meet with safety regulators this week to go over the details of the U.S. regional recalls that affect 10 automakers. Those recalls primarily cover hot and humid areas like Florida and Puerto Rico where the humidity may damage the propellant that triggers the air bag in the event of a collision.
The recalls, amid an NHTSA investigation into whether Takata improperly sealed explosive air bag inflators, have already cost Takata almost half its market value this year.
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.
The air bag safety crisis has prompted several lawsuits.
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. Underscoring investors' longer-term credit concerns, the cost of borrowing from the market has doubled from lows in the middle of the year. Yields on Takata 2021 bonds have jumped 25-30 basis points in the past week as investors worry about cashflow implications once supply contracts for existing car models run out.
"We have very limited concern on Takata's credit for the next couple of years," said a Tokyo-based credit analyst. "Serious changes could come after 2-3 years once outstanding car models are replaced. Automakers may reduce Takata's share of air bags, (though) they are just a part of the company's overall portfolio."
While leading Japanese carmakers, which traditionally have strong ties to their suppliers, are more likely to stick with Takata, the company "is going to see a real hit" from U.S. automakers Chrysler, Ford Motor and General Motors, and Germany's BMW, Upham said.
BMW declined to comment. A Takata spokesman said: "We take this situation seriously and will cooperate fully with the automakers and NHTSA on the investigations and recalls."
Jan Carlson, CEO of Autoliv Inc, told Reuters last week that the market leader has "seen business come our way" since July as the U.S. recalls grew, and Honda, which has recalled over 5 million cars in the U.S., has shifted some business to Daicel Corp, a rival Japanese air bag inflator maker which "had the flexibility to slightly expand capacity of an existing plant," a person with knowledge of the matter said.
Shares in Osaka-based Daicel have risen 40 percent this year, but the chemicals maker, which makes only the air bag inflators, not the whole air bag, doesn't - yet - have the capacity to take on a substantial chunk of Takata's business.
"Daicel smells blood in the water and they're really going hard after this business," Upham said. "They'll be increasing capacity. They're at the right place at the right time."
A spokesman for Daicel declined to comment.
Honda said on Friday it will continue to do business with Takata, though various decisions will be made after gauging the results of the U.S. regional vehicle recalls.
Toyota Motor Corp and Nissan Motor Co declined to comment specifically on the outlook for their ties with Takata. Toyota's Latin America operations chief Steve St. Angelo stressed last week that Toyota treats its suppliers as part of its family.
"Toyota's not one to just dump a supplier," he told reporters in Tokyo. "Have we ever eliminated a supplier? Yes. But it's really, really tough. We will exhaust every opportunity to help that supplier first."
Chrysler spokesman Eric Mayne said the firm "continues to work closely with its supplier to review the performance of certain air bag inflators." At Ford, chief financial officer Bob Shanks said Takata was not a major supplier. "There are alternatives. We actually don't use Takata to any significant degree," he said. GM's CFO Chuck Stevens declined to comment.
By 2020, Valient's Upham predicts Takata will have slipped to fourth in the industry rankings, with its share of the global air bag-inflator market halving to 11 percent. He sees Daicel's market share jumping to 24 percent from 16 percent, while Autoliv will remain on top with 28 percent of the market, up from 25 percent today.
1 US dollar = 108.3000 Japanese yen Additional reporting by Ben Klayman in Detroit, Mari Saito, Chang-Ran Kim and Maki Shiraki in Tokyo and Edward Taylor in Frankfurt; Writing by William Mallard; Editing by Ian Geoghegan