Honda Motor Co., the automaker that has issued the most vehicle recalls due to the faulty air bags created by the Takata Corp., has confirmed that the company expects to spend an additional $363 million (44.8 billion yen) in quality-related costs after the supplier of defective air bags agreed with U.S. auto safety regulators to an expanded auto recall in the country.
Teruhiko Tatebe, a spokesperson from Honda, mentioned that the cost amount would still be reflected on Honda's profits report from last financial year, which ended this March 2015 per accounting rules. Tatebe added that the cost would be on top of the $1.6 billion (202 billion yen) spent in quality-related expenses the company declared last fiscal year. The company, however, declined to release the number of vehicles included in the assessed recall cost.
The report would be submitted later this month and the charge would not affect its dividend and profit forecasts for the current fiscal year that would be ending by March 2016, according to an official statement of Japan's third largest automaker made in the Tokyo Stock Exchange on Friday. In April, the company projected $4.2 billion (525 billion yen) net profit that fell short of financial analysts' estimates after the quality problems resulted to Honda's biggest vehicle recalls in years and delayed the launching of its new vehicle models.
Takata, the world's no. 4 maker of air bags and the supplier responsible for the potentially deadly air bag inflators, has decided with U.S. safety regulators last April to declare more defective inflators, and that move made the total vehicle recalls to approximately 34 million units, which is now the largest auto recall in history. This has prompted the automakers to issue additional recalls.
The defective air bags have been described to explode and shoot out shrapnel into the body and face of both the front seat passenger and driver. According to court record and police reports, this has been linked with at least six deaths and most of the fatalities happened on cars manufactured by Honda. The Center for Auto Safety has listed at least nine serious injuries related to the defective air bags and at least two victims had metal pieces pierced their eyes, permanently damaging their vision.
For the latest round of auto recalls, auto makers have been temporarily bearing much of the related costs. In the future, Takata and the auto makers are expected to resolve how to divide the recall-related charges.
Photo: Brendan C | Flickr
