Daimler recalls 840,000 vehicles in US over Takata airbag issue

February 11
1:22 AM 2016

German auto giant Daimler has decided to recall 840,000 vehicles in the US over Takata's airbag inflators. The defective airbags made by Takata are causing a charge of €340 million ($383 million) for Daimler.  It's estimated that so far 14 automobile firms recalled about 24 million vehicles in the US. 

The recalling list of Daimler includes 705,000 Mercedes-Benz cars and 136,000 Daimler vans. However, Daimlers didn't announce which models were affected with Takata airbag inflators. 

Reuters reports that the recalling of vehicles would add to the costs prompting the company to revise 2015 financial results. The additional cost burden will lower the net profit from €8.9 billion to €8.7 billion. Group's earnings before interest and tax (EBIT) will also come down to €13.2 billion from €13.5 billion. 

The Stuttgart-based group reassured about the earnings as it hopes to perform marginally higher business volume this year. The company witnessed major gains in 2015. The higher investments and marginal rise in sales volume from the Chinese market are expected to add to the top line of the company for 2016. Takata airbags were linked to at least 10 deaths globally. 

Millions of cars have been recalled following the risk of airbag inflators explosion. Majority of vehicles recalled were with model year 2008 or before. The US regulators identified that new model vehicles are also prone to danger due to faulty airbag inflators. Daimlers said the recall was precautionary measure, as reported by WCVB, a Boston-based news site.

Frankfurt-based Bankhaus Metzler analyst Juergen Pieper said: "This (340 million euros) is quite a big shortfall but the main message is that the current financial year will not be affected." Pieper maintains his 'buy' recommendation on Daimler's stock.

The New York Times reports that so far no one from Daimler's consumers was injured due to Takata's airbag inflators. However, Daimlers is recalling vehicles as the US government alerted the global automobile major about potential problem. Daimler has booked $384 million charge for paying vehicle repairs and recalling costs. 

Takata Corp claims that 5.1 million additional inflators were defective after new testing results. The defective Takata airbag caused a death in December 2015. Takata's airbag inflators can explode with a greater force and spray metal particles against the driver and other co-passengers.

Till date, 14 automobile firms recalled about 24 million vehicles in the US alone involving 28 million Takata airbag inflators. Honda has recalled 2.23 million vehicles, Ford has recalled 361,000 vehicles, Mazda recalled 20,000 vehicles. 

The US National Highway Traffic Safety Administration in December 2015 appointed a former Justice Department official to help regulators monitor the ongoing complex recalls by several automobile companies. The US regulators in November 2015 slapped a $70-million fine on Takata. The Justice Department's investigation is going on.

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