With new Takata air bag recalls, automakers may face more liabilities

Takata Corp's bankruptcy filing last month was meant to draw a line under the auto industry's biggest safety recall, but last week's announcement of more air bag inflator recalls suggests automakers could face fresh liabilities in the future.

In late-2015, US regulators gave Takata until the end of 2019 to prove that its replacement air bag inflators - which add a drying agent to combat moisture that can set off the ammonium nitrate compound in an inflator, with potentially lethal results - are also safe.

If Takata fails that test - and some industry consultants, explosives experts and former employees question whether the workaround guarantees safety over the long-term - the 100 million or so replacement inflators currently being installed may themselves need to be replaced.

"Absent proof that the other desiccated inflators are safe, they will also be subject to recall," the US National Highway Traffic Safety Administration (NHTSA) said in a statement last week. The agency declined to comment on the risk that additional inflators may be subject to recall.

NHTSA announced last Tuesday that new testing at Takata prompted the Japanese parts firm to declare 2.7 million of the new air bag inflators defective, raising questions about the risk from replacement air bags as moisture can still seep into the propellant of some inflators.

Takata's automaker customers, which have so far borne much of the estimated $10 billion cost of replacing faulty bag inflators, could be on the hook for future liabilities in the event that Takata fails to prove that the desiccant workaround is sufficient.

Last week's recall is the first to involve Takata bag inflators that use a drying agent.

Nearly 20 automakers have been affected by the air bag recalls, and some still use Takata inflators for replacements in the recalls. Automakers including Honda Motor Co, Toyota Motor Corp and Nissan Motor Co have said they will stop using Takata inflators for new contracts for future models.

"If NHTSA in the future raises issues about the safety (of desiccated inflators) we will of course comply with their orders," Nissan's chief sustainability officer Hitoshi Kawaguchi told Reuters. "At the moment, our focus is on getting replacement inflators to our customers."

Toyota said it was "working closely with all stakeholders, including Takata, other suppliers and relevant agencies, to assess any potential impact and take action accordingly" on the recall issue. Honda, Takata's biggest client, declined to comment.

"The automakers... and Takata - they all know that this is a future issue," said Scott Upham, chief executive at Valient Market Research, whose clients include auto parts suppliers. "But I think everybody is concerned about the near-term issues, and the financial arrangements of the bankruptcy."

Takata says it has produced around 100 million replacement inflators containing drying agents: the 2.7 million recalled last week used calcium sulfate, and the rest contain zeolite.

"We still have to prove the safety of our desiccated inflators, but we believe those using zeolite are safer than those using calcium sulfate," said spokesman Toyohiro Hishikawa.

The company has declined to comment further on the testing process or the NHTSA deadline.