HMC Honda Motor Co Ltd

   (FROM THE WALL STREET JOURNAL 11/4/15) 
   By Yoko Kubota in Tokyo and Mike Spector in New York 

Honda Motor Co. said it will no longer use Takata Corp. front driver or passenger air-bag inflaters in new vehicles under development, after alleging the supplier misrepresented and manipulated test data.

The effective no-confidence vote from Honda, a major backer of Takata, came the same day U.S. auto-safety regulators hit Takata with a $70 million fine for lapses with rupture-prone air bags and ordered the company eventually to stop using a controversial propellant in the safety devices.

Takata Chief Executive Officer Shigehisa Takada told a news conference in Tokyo Wednesday that the company will quit offering inflaters with ammonium nitrate-based propellant world-wide in coming years by gradually phasing it out. Instead, it will shift to a different ingredient, guanidine nitrate, he said.

Honda -- which is Takata's largest customer and owns a small stake in the company -- said it had reviewed millions of pages of Takata internal documents from litigation over the safety problem and alerted U.S. regulators to evidence it became aware of that suggested the supplier "misrepresented and manipulated test data for certain air-bag inflaters."

"Honda expects its suppliers to act with integrity at all times and we are deeply troubled by this apparent behavior by one of our suppliers," the Japanese auto maker said.

Hiroshi Shimizu, a Takata executive, denied Honda's allegation that Takata has manipulated data. "We believe that did not happen," he told the Tokyo news conference.

Takata said in a statement that it regrets testing data issues raised by U.S. regulators, and doesn't believe they are connected to the current recalls.

Honda's decision adds to mounting woes at Takata. The Japanese air-bag manufacturer agreed Tuesday to financial penalties for failing to alert U.S. regulators in a timely manner to a defect in some air-bag inflaters that can cause them to explode and spray shrapnel in vehicle cabins, the National Highway Traffic Safety Administration said. Takata also agreed to fire some employees that regulators declined to name.

Takata had misled regulators by providing incomplete or inaccurate information on the safety defect -- linked to eight deaths and dozens of injuries -- dating back to at least 2009, regulators said. That included providing misleading test reports and failing to clarify inaccurate information in a January 2012 presentation to regulators, according to the settlement.

Takata will pay the $70 million in six installments over five years under the settlement's terms. The company will be forced to pay an additional $130 million if it violates terms of the settlement or federal law. Regulators described the possible $200 million payout as a record penalty.

"We deeply regret the circumstances that led to this," said Mr. Takada in an earlier statement, adding that the company is "committed to being part of the solution." He pledged to comply with terms of the settlement, which will "enable us to focus on rebuilding the trust of auto makers, regulators and the driving public."

Regulators assigned an independent monitor to audit the company's safety practices for five years, including requirements to eventually stop using phase-stabilized ammonium nitrate in air-bag inflaters by the end of 2018.

U.S. officials have cited the chemical as being prone in some instances to destabilizing and leading to explosions. Takata will start reducing the use of ammonium nitrate on a variety of fronts in driver-side and passenger-side air bags starting this year. Still, Takata will be allowed to honor contracts entered before Oct. 31 to keep selling air-bag inflaters using the chemical, though regulators can later order those to be phased out too, according to the settlement.

"This has been a mess," said U.S. Transportation Secretary Anthony Foxx during a Tuesday news conference, describing a pattern at Takata of misleading regulators and withholding information that "caused a serious problem to become a massive crisis." The Wall Street Journal reported details of the settlement earlier on Tuesday.

The settlement with Takata caps a long-running back and forth between the company and regulators over the problematic air bags that are at the center of one of the largest and most complex recalls in U.S. history. Regulators started investigating Takata in June 2014 and later hit the company with smaller fines for an alleged failure to cooperate with inquiries that were later suspended. The agency also issued special orders compelling the Japanese company to provide information to government officials.

The air-bag recalls, now covering more than 19 million vehicles in the U.S., could expand. Volkswagen AG and General Motors Co. have reported recent ruptures in newer side air-bags not currently covered as part of the far-reaching safety actions.

Older air bags employing ammonium nitrate as the propellant have been linked to deaths and injuries around the world, with Takata and regulators pointing to long-term exposure to humid climates as a main contributor to ruptures. Regulators on Tuesday said millions of additional vehicles are likely to be recalled, though they conceded they couldn't yet offer a precise figure. Regulators said Takata, after eight years, hasn't determined a root cause for the air-bag ruptures.

Regulators also issued an unprecedented order to the company and other manufacturers to speed recalls of the problematic air bags amid concerns repairs are lagging. The agency prioritized repairs of vehicles with older air bags with prolonged exposure to humid climates, ordering car manufacturers to fix those vehicles by the end of 2017.

As of late October, auto makers had addressed 22.5% of the more than 19 million affected vehicles in the U.S. Takata still could later face another hefty financial penalty depending on the outcome of a U.S. Justice Department investigation. The company has said it is cooperating with probes.

Five auto makers -- Honda, BMW AG, Fiat Chrysler Automobiles NV, Ford Motor Co. and Mazda Motor Corp. -- account for 14 million of the recalled vehicles and 18 million of the inflaters, regulators said in October. Honda received a $70 million regulatory fine at the end of last year for reporting lapses that included issues with Takata air bags.

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(END) Dow Jones Newswires

November 04, 2015 02:48 ET (07:48 GMT)

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