Honda has dropped Takata Corp as its airbag supplier, and the company’s stocks have dropped 13% since the breaking of the airbag explosion scandal. US auto regulators have linked 8 Honda car deaths to Takata airbags, prompting the car maker to drop their ties to the automotive parts company, resulting in a $70 million fine in settlements.
The eight reported deaths were caused by Takata airbags, which use ammonium nitrate. This compound can explode under too much force or by being exposed to high humidity for an extended period of time, and it sprays fragments of metal inside vehicles. This is also only the first of the many bills Takata will receive since the root of the airbag defect hasn’t been discovered yet. If this forces Honda to issue a recall, Takata could face a steep downfall. As things stand, Honda takes up about 10% of Takata Corp’s global sales, which is about 38% of their total revenue. After an aggressively worded statement, Honda declared it could not and would not use Takata airbags any longer, particularly because of evidence that suggests that Takata Corp could have manipulated data to fit regulations.
The cost to recall and repair the damage to the airbags could well exceed the corporation’s current market value, which stands at around $820 million. Since 2008, Takata airbags have been the reason behind the recall of around 40 million cars. The U.S. National Highway Traffic Safety Administration attached an additional command to the $70 million fine for the company to stop using ammonium nitrate in their products.
This will naturally prompt other companies to drop any investment in the company and to stop buying their airbags. Honda is a respected carmaker that has taken a very serious hit from the scandal, so it is likely that other Japanese carmakers will follow suit. Takata Corp will be paying the fine in six installments, panning out to October 2020.
