Airbag Recall Announced By General Motors And Other Automakers Will Hurt Airbag Supplier

General Motors announced the recall of 33,000 Chevrolet Cruze compact sedans yesterday after it was found a faulty module may cause the airbag to not inflate in the event of an accident. This was more bad news for GM, but was perhaps more troubling for the manufacturer of the airbag, Takata Corp, which could now face a $500 million charge and a net loss this year as a result of the matter.

GM isn’t the only automaker that has received faulty airbags from Takata. Other OEMs, including Toyota and Honda, have recalled a combined 10.5 million vehicles over the last five years to fix air bags made by the Japanese company. This number is expected to grow even further still, as Honda and six other manufacturers said they would recall more vehicles in certain regions of the United States after they were asked to do so by the National Highway Traffic Safety Administration.

The recalls have investors worried about the company’s financial state. It has about $1 billion in cash on its books, according to Reuters, but its recent woes may make automakers hesitant to do business with the company in the future.

“There is the worry that the volume of transactions with vehicle makers could decline because of the recall,” Koji Endo, an analyst at Advanced Research told Reuters.

The company is still the world’s second-biggest auto safety parts maker though, and has good development and research in addition to strong ties with automakers.

“The company has long had strength in design and development. From the perspective of multiple parts sourcing as well, it would be hard to imagine large volumes shifting to other suppliers in the short term,” Endo added.

The total cost of the Cruze recall for Takata is currently unknown, according to a Takata spokeswoman. However several analysts believe a cost per recalled vehicle of around $90 to $100 is plausible.