The Japan Credit Rating Agency downgraded its credit assessment for Takata Corp. from BBB+ to BBB- on Wednesday the fourth of November. The news caused the company’s stock to fall 13 percent and raised concerns from experts wondering if Takata’s business could implode on itself. They worry that the auto industry might be dependent upon the embattled company, which could lead to repercussions if the auto parts maker collapses.
Does The Auto Industry Need Takata To Stay In Business?
Half of the cars that Honda produced last year had a Takata airbag equipped in them—2.25 million vehicles. Half of those cars had Takata airbag inflators installed—1.125 million vehicles. Honda says that by the end of 2016, it can strip Takata inflators from all of its new models, but they are waiting on the results of investigations by the National Highway Traffic Safety Administration (NHTSA).
What Is The NHTSA Looking For?
NHTSA is already fining Takata $70 million and ordering the company to change the chemical propellant in their airbag inflators, or else it will face another $200 million in fines. NHTSA suspects that the ammonium nitrate based propellant Takata uses is responsible for the eight deaths and several injuries caused by shrapnel from exploding airbags. However, the facts are still sketchy at the moment.
How Is The Automotive Industry Responding?
For now, Takata’s biggest customer is ready to stop buying the company’s products—Honda represents 38 percent of Takata’s business—and the company is facing millions in fines. One expert, Koji Endo, tells the Wall Street Journal: “Everyone would be troubled if Takata disappears immediately; no one would be troubled if it disappears after 10 years.” A fact that NHTSA is aware of, since it is stretching payment of the fine from 2016 to 2020.