TOKYO (Reuters) - Takata Corp, whose potentially defective air bags have been linked to four deaths in the United States, warned of a bigger full-year loss and skipped its dividend - the first time it did not offer a payout since it listed in 2006.
The Japanese automotive safety equipment maker has been beset by chronic problems with defective inflators in its air bags, which can explode with excessive force and spray metal shards inside the vehicle. The air bags, used by many leading car makers, are the focus of an U.S. regulatory probe and have prompted the recall of some 17 million cars worldwide in the past six years.
Before a packed briefing room at the Tokyo Stock Exchange, Yoichiro Nomura, executive vice president and chief financial officer, bowed in apology to customers affected by the recalls. “We would like to apologize for worrying and concerning all our customers, automakers and shareholders who have been affected by repeated recalls of cars with our air bags,” he said.
Takata, which has 22 percent of the global market for air bag inflators - the explosive device that allows the air bag to inflate in a fraction of a second in the event of a crash - has already set aside 75 billion yen ($655 million), around enough to cover the recall of up to 9 million cars. It said it took an additional 2.3 billion yen charge in July-September to cover recalls of another 160,000 cars, but had not put aside funds to cover potential U.S. class action lawsuits against it.
The company booked a 49.9 billion yen special loss, which includes other costs unrelated to recalls, for April-September.
As uncertainty remains over potential future recalls and the likely cost of a growing number of legal cases against Takata and some automakers, including Honda Motor Co, its biggest customer for inflators, shares in Takata have almost halved in value since January.
Takata, which has a strong cash position for now, revised its full-year forecast to a 25 billion yen ($218.4 million) net loss from a previous forecast for a 24 billion yen loss. It reported a first-half net loss of 35.24 billion yen, versus a year-earlier profit of 769 million yen.
Nomura said the forecasts were calculated on the assumption that Takata, with “manufacturer’s liability”, will bear the full cost of the recalls. He said he was unaware of any discussions with automakers about sharing recall costs.
Takata said it had not heard of any orders being canceled for the current second half of this year.
Osaka-based Daicel Corp, a rival air bag inflator maker whose main businesses are in synthetic resins, chemicals and plastics, earlier raised its full-year profit forecasts after strong sales of its main products in the first half.
Shares in Daicel, formed from a 1919 merger of eight regional celluloid manufacturers, have jumped by as much as a quarter in the past two weeks - valuing the company at over $4.1 billion - on hopes it can win business away from Takata.
But senior managing executive officer Masumi Fukuda told reporters in Osaka that Daicel was not currently in talks on new air bag inflator orders. “At this time, we are not in any new discussions with our customers like Honda. There’s no discussions at all right now,” he said.
Valient Market Research, headed by a former Takata employee, predicts Takata’s share of the global air bag-inflator market will halve by 2020, with Daicel’s market share jumping to 24 percent, from 16 percent now.
Daicel, which includes its inflator business in the pyrotechnic devices division along with parts for fighter jet ejector seats, missile components and shotgun cartridges, pushed up its full-year operating profit forecast to 47 billion yen, up 24 percent on last year. It now sees net profit of 28.5 billion yen in the year to next March.
Daicel doesn’t disclose how much its inflators business contributes to overall sales, but the pyrotechnic devices division is expected to make up close to a fifth of total revenue this year.
Fukuda said there was “no point” in Daicel rushing to increase capital spending on air bags without more information on the related recalls, noting it would be difficult for other companies to replace those made by Takata.
By most financial metrics, Takata is the worst performer among more than 100 Japanese auto parts makers.
Apart from its steep share price decline, which has chopped its market value back to a little over $1.1 billion, Takata’s forward price/earnings ratio of more than 75 is the highest in the industrial sector in Japan, according to Thomson Reuters SmartEstimates. The company’s operating margins also rank bottom in the sector, as does its return on equity, at minus 25 percent in the April-June quarter.
Shares in Daicel, which reported earnings during market hours, closed down 2 percent, while Takata, which reported after the market’s close, fell 1.4 percent. Tokyo’s benchmark Nikkei slipped 0.9 percent.
Additional reporting by Yoshiyuki Osada in OSAKA, Umesh Desai and Shilpa Murthy; Editing by Ian Geoghegan