Honda to pay $605 million to settle Takata air bag lawsuit

NEW YORK - Honda Motor Co. said Friday it has agreed to pay $605 million to settle a lawsuit filed by U.S. vehicle owners seeking compensation for economic losses related to recalls of Takata Corp. air bags.

With the settlement by Honda, the Japanese automaker which had sold the most vehicles carrying Takata air bags, six automakers from Japan and Germany will pay a total of more than $1.2 billion in compensation following the class action lawsuit.

The settlement will cover expenses including taxi fares incurred while the owners' cars are under repair as well as an outreach program to ensure air bags are replaced, according to Honda and a document regarding the lawsuit.

In the lawsuit, Toyota Motor Corp., Mazda Motor Corp., Subaru Corp. and BMW AG reached a settlement in May for payments totaling $553 million. In August, Nissan Motor Co. also reached a settlement with vehicle owners to pay at least $97 million.

Ford Motor Co. has yet to settle the lawsuit and plaintiffs will continue seeking a settlement, according to U.S. media.

Honda has started its own program to call on vehicle owners to replace air bags.

A Honda official said the payment is unlikely to have a major impact on the company's earnings as it has already factored in some of the expenses resulting from the settlement.

Takata air bags have proved liable to explosions in which metal fragments have been known to spray at drivers and passengers. The defective inflators could have led to 13 deaths in the United States, where a total of 42 million vehicles across 19 automakers are subject to recall.

Takata has filed for bankruptcy protection as part of a restructuring scheme to restore its business that has been badly battered by the global recall of its defective air bag systems.

source: news.abs-cbn.com

As recalls mount, Takata, Japan automakers stuck in uneasy reliance

TOKYO - Air bag manufacturer Takata Corp and Japanese carmakers including Honda Motor Co are locked in the commercial equivalent of a bad marriage; not entirely happy in each other's company but unable to break apart and wary of potentially costly court battles.

Honda on Friday unveiled a new model with an unusual sales pitch - fuel efficient, lots of cargo space and, by the way, no air bag inflators made by Takata, the Japanese supplier at the centre of a global safety crisis that has rocked both companies.

Over the past five years, recalls have ballooned to include 36 million vehicles fitted with potentially lethal Takata air bags, triggering a criminal investigation and lawsuits in the United States, and testing ties between Takata and its main customers, bankers and auto executives say.

Automakers don't normally discuss supply arrangements for components like air bags in their new models.

But in a departure that underscores an increasingly strained relationship, Sho Minekawa, Honda senior managing director, said the new Shuttle wagon sold only in Japan would use inflators from Takata's rival, Daicel Corp.

"We use very little from Takata for our domestic models and that's been the trend in recent years," Minekawa said in response to a question at the launch of the new car. "There was a time when we used a lot."

The uneasy dynamic explains why Japan's automakers have not been agitating for a shake-up or even restructuring at Takata even as they give new contracts to other suppliers.

The automakers need Takata to supply replacement parts for urgent repairs and cannot demand compensation that would endanger its ability to do so in an industry where no rival could readily take up the slack.

A court battle could risk embarrassing disclosures about the responsibility of automakers in reviewing Takata's designs or in pushing for cost cutting, a banker who has been in contact with Takata said.

"The most important thing from the perspective of the automakers is that they can ensure replacement parts are being supplied in a stable fashion," said Masaki Higurashi, deputy director of the automobile division at Japan's trade ministry who is involved in coordinating the government's monitoring of the recall crisis.

Any discussion of restructuring would have to wait until after that, he said. "After all the replacement parts are supplied, the automakers have to decide whether to let Takata stay on as it is," he said. "I think the automakers are starting to think about that."

Honda, still Takata's largest customer, recalled almost 5 million more cars last week after concluding the Takata air bags they contained were at risk of exploding in accidents. Toyota Motor Corp added another 5 million vehicles to the tally and Nissan Motor 1.5 million.

Six deaths, all in Honda vehicles, have been linked to shrapnel from defective Takata air bags. Problems with Takata air bags have also been linked to more than 100 reported injuries.

'NO CHOICE BUT TO STAY TOGETHER'

The Japanese automakers and Takata failed to agree on whether the most recent recalls were necessary based on data provided by Takata.

As a result, there is no agreement between Takata and the automakers on how to split the costs, representatives of both sides said. That will have to wait until after they have determined why Takata air bag inflators are breaking down.

Takata will not be able to go it alone. The new costs could be as much as $1 billion if all vehicles covered by the new recall were repaired and the $100-per-car estimate favored by analysts applied. By comparison, Takata's market value is a little over $1 billion.

Takata has allocated $520 million to cover recall costs. At a meeting with analysts on Thursday, CFO Yoichiro Nomura said Takata had asked automakers to allow it to pay its share of recall costs in installments, a concession that would allow it to avoid a potentially destabilizing charge, according to analysts who attended the closed-door briefing.

Takata CEO Shigehisa Takada, whose family controls some 57 percent of the auto parts maker, did not attend the meeting. Nomura told attendees the CEO was busy with quality issues.

Honda is using a Takata competitor, Toyoda Gosei, for driver's-side air bags for its new Accord sedan in North America, two people with knowledge of that move have said. Toyota is no longer among Takata's top five customers.

Even so, one purchasing manager at a Japanese automaker involved in the recalls, who asked not to be named, said the companies were forced to rely on Takata given its 20 percent plus global market share.

"We have no choice but to stay together," he said.

source: www.abs-cbnnews.com

Why Honda cut production at Thai plant

BANGKOK - The Thai unit of Honda Motor Co has cut production at its Ayutthaya plant to 60 percent of capacity to reflect weak domestic demand, voicing concerns sales may fall short of its target this year after months of political unrest.

Thailand's auto sector, southeast Asia's biggest, is one of the more visible victims of the weakened economy and unrest which culminated on Thursday in army chief General Prayuth Chan-ocha taking control of the government in a coup.

The sector has fired more than 30,000 subcontracted workers this year and slashed production, as sales plunge after months of political unrest that threatens to drive some manufacturers offshore.

The Japanese carmaker has also decided to delay by between six months and a year the startup of a new $530 million plant from its previously planned April 2015 date, said Pitak Pruittisarikorn, executive vice president at Honda Automobile (Thailand) Co.

"We have been worried about the unfavourable conditions since earlier this year, both economic and the political situation," he told reporters on the sidelines of a marketing event.

The Ayutthaya plant has an annual capacity of 300,000 vehicles, while the new plant under construction in Prachinburi will have an annual capacity of 120,000 vehicles, he said.

The production cut, which involved scrapping overtime shifts, reflects weaker demand and aims to clear unsold stock, Pitak said, adding its inventories were now back to normal.

Pitak said Honda's sales in Thailand may miss a target of 160,000 vehicles this year, while overall domestic sales are likely to fall below 1 million vehicles.

Domestic auto sales in April dropped 33.2 percent on the year, according to data from the Federation of Thai Industries.

Sales fell 7.7 percent to 1.33 million cars in 2013.

Domestic sales have declined since the ending in 2012 of a government first-car subsidy scheme, which had boosted sales 81 percent that year.

source: www.abs-cbnnews.com

Honda becomes 1st Japan automaker to be net exporter from US

Honda Motor Co last year exported more cars out of the United States than it imported into the country, claiming a first among major Japanese automakers.

More than 30 years after it began building cars in the U.S., the company's North American arm said it shipped 108,705 Honda and Acura brand vehicles out of the U.S. in 2013. The company imported 88,537 vehicles into the U.S. from Japan.

Rick Schostek, Honda North America's executive vice president, told reporters on a conference call the milestone was "one that's been 30 years in the making". The exported vehicles carried a value of $2.658 billion.

The net exporter status is also the product of significant recent investment - Honda has put more than $2.7 billion into expanding its North American auto plants in the past three years. That's part of a strategy designed to boost production in the U.S. and make cars close to the markets where they are sold, said Schostek.

Honda shipped from U.S. plants last year to 50 countries, but most of the exports went to Mexico. Honda did not include shipments to Canada in its U.S. export figures.

Having begun importing the gas-sipping subcompact Civic into the U.S. in 1973, Honda began making cars in the country in 1982. Its Marysville, Ohio, plant, was the first to be owned by a Japanese auto company in the U.S., and the Accord sedan was the first model to roll off its assembly line.

The company now has seven auto assembly plants in North America, including four in the United States. An eighth plant in Celaya in Mexico opens next month, making the Honda Fit subcompact.

From 1987 to 2012, 1 million Honda vehicles were exported after production at U.S. plants. In 1988, it exported an Accord Coupe to Japan for the first time, but the company now does not export any U.S.-made products to its home base in Japan.

EXPORT-IMPORT TREND

The 2013 numbers marked a significant switch from a year earlier as Honda stepped up investment and production. In 2012, Honda imports to the U.S. market were about 136,000, outnumbering exports from its U.S. of about 74,000.

Honda also set a record last year for the number of vehicles it built at U.S. plants, about 1.3 million. Including plants in Canada and Mexico, Honda made 1.78 million vehicles in North America.

Honda's trend toward increasing its exports from U.S. and North American plants will continue in the next few years, Schostek said.

The gap in favor of imports to the U.S. market was substantially wider just five years ago, when 187,000 Honda and Acura vehicles came into the U.S. market while only about 20,000 were exported.

The weaker yen had little impact on imports from Japan in the U.S. market, primarily due to the long-term strategy of localized production, Honda said.

Schostek said boosting U.S. exports by the company is aided by the increasing reliance on U.S.-based research and development of Honda and Acura vehicles sold in North America. A third of the Honda and Acura vehicles sold in the U.S. were designed and developed there, Schostek said.

Honda says that 95 percent of the vehicles it sells in North America are made at local plants.

source: www.abs-cbnnews.com