Complete Airbag Recall Could Cost Takata $24B In Worst-Case Scenario

With the massive Takata airbag recall seemingly growing by millions of vehicles and inflators every few weeks, the Japanese auto parts maker is looking to the future of its wallet, determining that if a comprehensive recall of the company’s inflators eventually occurs it will spend roughly $24 billion. 

Bloomberg, citing a person close to the matter, reports that a worst-case scenario involving the recall of all Takata airbags containing the volatile chemical explosive ammonium nitrate — one of the root causes for the violent ruptures that have killed nine people in the U.S. and 10 in the world — would total more than 287.5 million inflators.

A spokesperson for Takata declined to comment on the possibility of an all-encompassing recall of airbags, saying the company doesn’t disclose production figures for specific products.

The $24 billion cost estimate, which is more than the company’s total assets in 2015, far exceeds a previous projection by Jefferies Group analysts of $7 billion, Bloomberg reports.

Of course, Takata’s share of the $24 billion could be lowered, depending on how the auto parts maker and carmakers determine to split the costs of repairs and replacement parts.

“Even if this is the worst-case simulation, it shows the company has seen some possibility,” Ken Miyao, an analyst with Tokyo-based market researcher Carnorama, tells Bloomberg. “The question is how much the carmakers want to split the costs. But even if Takata only bears half of the cost, this would still be beyond their scope.”

So far, Takaki Nakanishi, an analysts with Jefferies, estimates that Takata has spent $5.4 billion on the recall and that future recalls could total $80 per unit, Bloomberg reports.

“It is not difficult to imagine how hard it will be for Takata to rebuild its financial standing if the expenses are apportioned,” Nakanishi wrote. “The Japanese automotive industry cannot avoid seriously adopting an exit strategy from the Takata issue.”

Takata Puts Worst-Case Airbag Recall Costs at $24 Billion [Bloomberg]