Takata tightens screws on suppliers as air bag crisis mounts: sources

By Reuters

Dec 14, 2014 05:55 PM EST

Takata Corp. (7312.T) has begun enforcing tighter quality controls on a group of parts suppliers as the auto safety equipment maker boosts production to replace millions of air bags recalled for a potentially deadly defect, according to people involved.

Takata, whose exploding air bags have caused five deaths and a recall of more than 20 million vehicles globally, has come under investigation by U.S. safety regulators and federal prosecutors and intense scrutiny from U.S. lawmakers.

Over the last two months, the company has launched a series of "urgent" inspections across its supply network and dispatched managers to parts makers in Japan and Asia to announce the changes, according to those involved, who asked not to be identified.

At one closed-door meeting in Japan between Takata executives and over 100 of its suppliers in mid-October, Takata said its representatives would inspect 40 suppliers of key parts before the end of the year and audit the remainder of the firms in 2015, one of those involved said.

"Takata has become extremely strict when it comes to quality control now," said one of the people who was present at the meeting.

Suppliers said the way the inspections were carried out did not differ much from regular quality checks made by Takata, but they highlighted the speed and the unusual sense of urgency with which they have been announced.

"This time it was different. This inspection had not been planned before and was announced out of the blue during the meeting," said the person involved. "They came to my factory within one, two weeks from setting the date," said the person.

Takata spokesman Toyohiro Hishikawa declined to comment on the company's dealings with its suppliers.

Takata has not identified the cause of a defect with its air bags that has left some of them prone to blow apart in accidents and shoot shrapnel inside vehicles. The five deaths were linked to Takata air bags in Honda Motor Co (7267.T) vehicles, while the recalls around the world affected a range of carmakers.

There is no suggestion that the safety problems have been the result of quality controls at Takata's suppliers.

In discussions with suppliers, Takata executives did not elaborate on the reasons for the quality audits, which have gone beyond air bag parts suppliers.

Takata sits at the top of a pyramid of more than 100 suppliers in Japan, the sources said. Many of those businesses are family-run, local manufacturers with long-standing ties to Takata that employ a handful of workers and make nuts, bolts and buckles used in Takata's air bags and seat belts.

Takata Chief Executive Shigehisa Takada told investors in June that the company had allowed its operations outside Japan too much leeway at a time of fast growth in demand for the company's air bags.

During a visit to a Takata supplier in Southeast Asia, a senior manager dispatched from headquarters told managers at the plant that Takata's Tokyo headquarters had assumed responsibility for ensuring a "global standard" in quality. 

As part of that, the company signalled it would try to incorporate improvements suggested by its suppliers into manufacturing and design. Takata urged the supplier to be extra careful on quality management "because of the circumstance we're in", a person who attended the meeting said.

Takata has 55 factories in 20 countries, eight of which are located in Japan. The only facility that makes air bags in Japan is a plant in Kyushu in southern Japan, according to the company's website.

The company's manufacturing in Japan is concentrated in Shiga, in western Japan, where Takata has three manufacturing centres in Echigawa, Hikone and Nagahama where it produces seat belts and carries out tests.

Takata has had problems with ensuring consistent quality standards from suppliers in the past, documents reviewed by Reuters show. In 2006, engineers at the company's Monclova, Mexico plant found that welds on air bag inflators were failing because steel pipes shipped from a Japanese supplier had too much carbon, according to an engineering report.

In recent meetings with suppliers, Takata representatives have not discussed the impact of the ongoing recalls in detail, people involved say.

"Maybe it is a Japanese thing, but they don't talk about it, and it's difficult for us to ask," said one long-term Takata supplier. "So we learn about everything from the press."

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