U.S. auto regulator seeks nationwide recall of Takata air bags

Wed Nov 19, 2014 1:57am EST
 
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By Julia Edwards and Eric Beech

WASHINGTON (Reuters) - The U.S. auto safety regulator has told Japanese supplier Takata Corp (7312.T: Quote) and five automakers to expand nationwide a regional recall of potentially lethal air bags, increasing pressure on the industry to move faster in a growing scandal.

The National Highway Traffic Safety Administration (NHTSA) also scolded Takata for what it called "an unwillingness to move forward" on a nationwide recall, and said the company needs to be open with the U.S. public about the risks of its air bags.

Takata and automakers have so far taken a targeted approach in recalling U.S. vehicles with air bags that can rupture upon deployment, shooting shrapnel into the car. Five fatalities, including four in the United States, have been linked to the air bags.

The U.S. regional recall has involved 4.1 million cars in hot and humid areas where the air bags may be prone to fail, including Florida, Alabama, Mississippi, Georgia, Louisiana and parts of Texas along the Gulf of Mexico. Most of those cars are made by Honda Motor (7267.T: Quote), Takata's biggest client.

In a call with reporters on Tuesday, NHTSA Deputy Administrator David Friedman declined to estimate how many more cars would be included in a nationwide recall.

Shares in Takata dropped by as much as 7.8 percent in Tokyo on Wednesday, and have now slid 64 percent this year to 5-1/2-year lows.

Takata has already set aside more than $750 million for recall-related costs, but Takayuki Atake, manager of credit research at SMBC Nikko Securities, warned a national recall would need more provisioning and raised the risk of a deeper credit rating downgrade than initially expected.

Japan Credit Rating Agency has put Takata's single-A rating on negative watch. "However, risk of a (three-notch) downgrade to BBB would increase if the expanded recall leads to further erosion of shareholder equity and/or a negative impact on Takata's capacity for generating profits and cash flow," Atake wrote in a report.   Continued...

 
A billboard advertisement of Takata Corp is pictured in Tokyo September 17, 2014.  REUTERS/Toru Hanai