Takata warns of annual loss, recall and sales woes only set to mount

Mon May 9, 2016 7:29am EDT
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By Naomi Tajitsu

TOKYO (Reuters) - Japan's Takata Corp (7312.T: Quote) said it would post a loss for the past business year - a warning that comes on top of a huge expansion in its global recall of air bag inflators and adding urgency to the need for it to secure financial aid.

Takata has begun looking for a financial backer to help pay for the costs to recall inflators, sources said last month. Since then, however, its woes have only worsened.

U.S. transport authorities last week announced a recall of up to 40 million more of the company's air bags, on top of the more than 50 million that have already been recalled globally.

The inflators can inflate violently, releasing metal shrapnel into the vehicle and have been blamed for 11 deaths and more than 100 injuries, mainly in the United States.

Takata warned it would post a net loss of 13 billion yen ($120 million) for the year that ended March 31, down from its previous estimate for a 5 billion yen profit.

The loss amount is not that big, but this is largely due to most recall costs so far having been borne by automakers and Takata benefiting from a jump in sales to replace the inflators. Airbag revenue has surged 60 percent in the last three quarters compared to three years earlier.

Takata is, however, widely seen as likely having to bear much more of the recall costs - though exactly how much is yet to be determined as the company and automakers still need to thrash out responsibility over the root causes of the defect.

If Takata was found to be solely responsible for the problem, it could face a bill of more than $9 billion in recall costs, based on a rough calculation that each replacement kit costs around $100. It also faces U.S. lawsuits.   Continued...

A sign with the Takata logo is seen outside the Takata Corporation building in Auburn Hills, Michigan, U.S. May 20, 2015. REUTERS/Rebecca Cook/File Photo