Takata Falls After U.S. Senators Call for Criminal Probe

By Craig Trudell

Takata Corp. (7312), the Japanese auto-parts maker at the center of an air-bag recall crisis, fell to the lowest in more than five years in Tokyo trading after U.S. lawmakers called for a criminal investigation of the company.
Takata dropped 17 percent to 1,177 yen at the close of trading, the lowest since May 2009. The shares have plunged 61 percent this year, the fifth-biggest drop among the more than 1,800 companies in Japan’s benchmark Topix index, which has gained 4.4 percent.
U.S. senators last week called for the Justice Department to open a criminal investigation after a report said Takata conducted secret tests of its air bags in 2004, years b
efore they were linked to deaths, injuries and recalls of millions of cars. The company deleted test data and disposed of air bag parts that had malfunctioned despite finding flaws and beginning work on a recall, the New York Times reported, citing interviews with two former employees it didn’t identify.
“If the reports are true, the company must be held accountable for the horrific deaths and injuries that its wrongdoing caused,” Democratic Senators Richard Blumenthal of Connecticut and Edward Markey of Massachusetts said in a statement. “These allegations are credible and shocking -- plainly warranting a prompt and aggressive criminal probe.”

Photographer: Tomohiro Ohsumi/Bloomberg

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Takata disputed the Nov. 7 report in the New York Times by calling the former employees’ allegations “fundamentally inaccurate.” The company said Al Bernat, identified in the report as a former executive who supervised the air bag tests in 2004, remained an employee of the company.

Takata Statement

“Takata takes very seriously the accusations made in this article and we are cooperating and participating fully with the government investigation now under way,” the Tokyo-based company said in an e-mailed statement.
The U.S. National Highway Traffic Safety Administration has given Takata until Dec. 1 to answer questions under oath and turn over materials detailing how it’s handled air-bag problems going back to 2000. The devices have been linked to four deaths and the recall of almost 8 million vehicles by 10 automakers in the U.S. since last year.
The yield premium investors demand to hold Takata’s seven-year bond sold in March rose to a record high of 374 basis points on Nov. 7, up 309 basis points in the last month, according to data compiled by Bloomberg.

Bond Yields

Takata is an outlier in Japan’s corporate credit market, where companies are selling bonds at interest rates near an 11-year low of 0.32 percent per annum. Investors willing to buy Takata’s bond can earn 4.3 percent, according to data compiled by Bloomberg.
Honda Motor Co. (7267), Takata’s biggest customer, is aware of the New York Times report and calls by U.S. lawmakers for a probe, said Akemi Ando, a Honda spokeswoman. The company’s focus is on fixing the problem and ensuring quality, and there has been no discussion about changing suppliers, she said.
Toyota Motor Corp. declined to comment on relationships with individual suppliers, said Ryo Sakai, a spokesman for the carmaker. The company’s first priority is to minimize the inconvenience to its customers, he said.