Takata Corporation Stock Down 25% As Air Bag Scandal Widens

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Japanese air bag manufacturer has fallen on hard times. The dominant player in a growing industry just months ago, now the beleaguered firm faces more dramatic losses of orders, and Takata shares lost close to 25% of their valued in Thursday’s trading in Tokyo.

The avalanche began Thursday when several Japanese auto makers followed Honda Motor Co. and dropped hints they would avoid using ammonium-nitrate air-bag inflaters made by Takata in their new vehicles.

Mazda Motor Corp. said it won’t use Takata-made air bag inflaters with ammonium-nitrate based propellant in vehicles currently under development. Subaru owner Fuji Heavy Industries also noted it is considering not using Takata’s inflaters for new models, and Mitsubishi Motors also said it is looking at whether to switch suppliers for its upcoming models.

The multiple announcements came following Honda’s statement a few days ago that it will no longer use Takata-made front driver or passenger air-bag inflaters in newly developed vehicles, claiming the air bag maker misrepresented test data.

Also of note, earlier this week U.S. regulators ordered Takata to eventually stop using ammonium-nitrate based propellant in inflaters, meaning auto makers will eventually have no choice but to stop using that type of inflater.

Takata share price plunge

Takata shares plummeted almost 25% to 889 yen, the lowest level since early 2009. The firm supplied tens of millions of air bags that are involved in a global recall. Of interest, Takata will report second-quarter earnings on Friday.

More on problem with Takata air bag inflators

An inflater is a key part of an air-bag module. It houses propellant tablets, which ignite and create gas that fills up the air bag. Many air bags produced by Takata contain ammonium nitrate-based inflaters made by Takata, while others use inflaters made by non-Takata suppliers such as Daicel Corp.

The recalled air bags are equipped with Takata-made inflaters that may explode and shoot shrapnel. This explosive shrapnel air bag issue is related to at least eight deaths.

Analysts point out that other inflater manufacturers have already or are considering increasing their production capacity to help Takata come up with replacement air bags for the millions of recalled vehicles.

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