Takata bankruptcy puts the spotlight on Japan Inc

The news did not catch anyone by surprise since it was expected to happen anyway.

Takata filed for bankruptcy early on Monday, and Key Safety Systems, a Michigan-based parts supplier owned by China’s Ningbo Joyson Electronic Corp, said on Sunday that it had reached a deal with Takata to purchase nearly all of its assets for about $1.57 billion.

Takata’s bankruptcy brought the curtains down on an airbag inflator saga that took its toll on a host of Japanese automakers. The most prominent among these was Honda, which has seen top leadership exits a couple of years ago reportedly due to the Takata airbags recall issue even while this ‘cause and effect’ has never been officially confirmed.

Toyota, Nissan and Mitsubishi were the other companies affected because of the costs of replacement and now with Takata going bust, it remains to be seen whether they will be able to recover any of their balance dues. For the moment, it seems very unlikely, which means that these carmakers will have to take the hit even while they have moved on to alternate airbag suppliers.

While Takata’s fall from grace was not entirely unexpected, it also signals a challenge for the Japanese auto industry which has had its share of challenges in recent times. Take the case of Mitsubishi, which was embroiled in a mileage fudging controversy, that came at a time when the Volkswagen diesel scam of 2015 had already rocked the world.

Mitsubishi went through a tough time through 2016 before it was bailed out by Nissan Motor in October, which led to a controlling stake in the company. Going forward, this new alliance is expected to play a big role in catapulting the Renault-Nissan combine to levels that can take on Toyota and Volkswagen.

Likewise, Suzuki also went through a brief rollercoaster ride when it had to own up for flaws in fuel economy tests for cars in Japan. However, this controversy was on a relatively lower scale compared to the attention that Mitsubishi attracted. Yet, it still managed to take a bit off the sheen from the Suzuki brand, at least at that point in time.

It would be premature to assume that these incidents have set alarm bells ringing in Japan’s automotive ecosystem. The likes of Toyota, Honda and Nissan are still formidable names to reckon with in the global arena.

It is also an interesting coincidence that alliances have also become the order of the day in this country where apart from Nissan and Mitsubishi, other interesting relationships are beginning to be forged; be it Toyota-Suzuki or Honda and Yamaha in the two-wheeler space.

It is also not as if other automakers around the world have been spared of controversies. Who would have thought that a potential leader like VW would be embroiled in a scam that continues to revisit the company from time to time? General Motors has had its share of faulty ignition switch recalls, which have hit the headlines quite regularly. Likewise, other big brands have had to deal with controversies from time to time.

Going forward, with safety and emission requirements getting more stringent, automakers will be under greater pressure to ensure that compliance goes hand in hand with stringent supervisory controls at every stage of manufacturing. Nobody wants to be in a situation where they are perceived as being culpable with deliberate malafide intent in mind.

In Japan’s case, beyond the automotive space, Toshiba was in the news when its US nuclear unit, Westinghouse, filed for bankruptcy in March this year. The parent company has been going through hard times following an accounting scandal in 2015 and will really have to pull out all stops to steer clear of any potential abyss it can plunge into. At this point, Japan Inc can do without a Takata encore.

COMMENT NOW