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Is the Takata Airbag Recall Saga Finally Coming to an End?

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Takata Corporation is recalling another 10 million potentially deadly air bag inflators sold to 14 different automakers. This might possibly put an end to the epic recall saga. Markedly, this is set to be the final phase in the series of recalls that the now-bankrupt auto supplier had agreed to undertake in a 2015 settlement with U.S. safety regulators. Reportedly, the 10 million inflators are among the approximately 70 million in the United States that Takata was supposed to recall in compliance with the National Highway Traffic Safety Administration (“NHTSA”) accord. This will likely bring to close the largest series of automotive safety recalls in the U.S. history.

According to government documents, vehicles made by automakers including Toyota Motor TM, Honda Motor (HMC - Free Report) , Ford F, General Motors GM, Daimler AG DDAIF, BMW AG BAMXF, Fiat Chrysler FCAU, Ferrari, Mitsubishi, Subaru, Volkswagen, Mazda, Audi and Nissan have been affected. While a few car companies have already made such announcements, most are yet to determine the models that are affected and issue safety recalls.

A couple of days back, Subaru announced recalls of nearly 500,000 vehicles from 2003-2014 model years that have potentially lethal Takata airbags in the front passenger seat. Affected Subaru vehicles include Baja, Forester Impreza, Legacy, Outback and WRX models. The recall also covers the 2005 and 2006 Saab 9-2x made by Subaru for General Motors. The defect might result in airbags either exploding or under inflating during deployment.

Toyota, Suzuki and Mazda have also recently issued voluntary recalls for more than 18,000 vehicles. The affected models are built between 1996 and 1999,and are fitted with deadly Takata NADI 5-AT airbags. Notably, Toyota is offering to buy back the vehicles and providing rental car option until the airbag is replaced. Mazda and Suzuki are also offering to buy the affected vehicles back from the owners.

In December 2019, BMW, Audi and Ford had recalled around 17,000 vehicles with Takata NADI 5-AT airbags. These airbags could injure people in the car by misdeploying in an accident. In some cases, these are not fully inflated in a crash, thereby failing to protect drivers properly. Last month, Takata issued recalls for 1.4 million airbag inflators equipped on certain U.S. cars from the 1995-2000 model years. The Japanese auto supplier’s largest customer Honda, which is a Zacks Rank #3 (Hold) firm, recalled around 1.1 million cars with faulty Takata airbags. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Takata inflator scandal has triggered massive recalls by various automakers. Notably, Takata used ammonium nitrate to create small explosions to inflate the airbags. However, the chemical can deteriorate over time due to fluctuating temperatures and high humidity. It can burn too fast and blow apart a metal container, hurling shrapnel into drivers and passengers. At least 25 people have been killed worldwide by injuries inflicted by defective Takata airbag inflators.

It has been nearly a decade that carmakers have been recalling vehicles over faulty Takata airbags. While many companies have requested for more time to carry out the repairs, some are seeking exceptions and want their cars to be pulled out of the Takata recalls. According to NHTSA, each recalled group of vehicles is expected to take two and a half years to repair. So even if the recall of 10 million airbags is the last in the series, it won’t be possible to solve everything before 2022. Even afterward, there will be vehicles with faulty airbags on the road because recalls usually have around 80% completion rate. Further, recall completion rate for older vehicles is even lower than that.

But the important question is will the largest and most complex automotive recall come to an end with the recent issue of 10 million recalls? Well, it’s not certain, because some issues still remain unresolved. Notably, according to USA Today, Takata has until the end of 2020 to prove to NHTSA that inflators using ammonium nitrate with a moisture absorbing chemical are safe. If it cannot prove the same to NHTSA within this deadline, then the Takata airbag saga will continue, with more inflators likely to be recalled.

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