Takata CEO to Offer Resignation Over Explosive Air Bags: Sources

TOKYO - Takata Corp will tell Japanese automakers on Friday that its chief executive is willing to resign to demonstrate that the company takes responsibility for the auto industry's biggest recall, two people close to the Japanese air bag maker said.

Pressure has been building on the Tokyo-based company for almost two years over defective air bags that can explode with excessive force and shoot shrapnel inside the car - a problem that has ballooned into a damaging safety scandal affecting nearly 50 million vehicles. The company said on Tuesday that an 11th death could be linked to a faulty air bag.

"There are plans for management reforms," said one of the individuals, adding this would involve expressing the willingness of Chairman and CEO Shigehisa Takada, the bookish grandson of the group's founder, and other executives, to resign.

Image: Takata Corp Chief Executive Shigehisa Takada
Takata Corp Chief Executive Shigehisa Takada at a media conference in Tokyo on June 25, 2015. YUYA SHINO / Reuters

He added Takata will present this step as part of its business plans at a meeting with automakers on Friday. The sources declined to say when Takada might step down or who is in line to replace him as head of the 83-year-old firm.

The company has not taken any formal decision on Takada's future and no successor has been designated, the sources said.

A Takata spokesman would not comment on whether the company was planning a change in management, or if Takada planned to take responsibility for the recalls.

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Takata may come under renewed pressure when Germany-based Fraunhofer Institute reports on its investigation into the causes of air bag inflator failures. Japanese media have reported that the findings, commissioned by Takata, are due within weeks.

Fraunhofer was not immediately available to comment on when the final results would be ready.

Partial results of its inquiry released last June showed that the air bag explosions appeared to result from damaged or improperly assembled inflators, and when ammonium nitrate, the chemical compound used to inflate the air bag, came into contact with moisture, a particular concern in humid regions.

Takata said then that the root causes of the air bag failures were still unclear.

If the final report finds Takata liable for defective air bags, it could leave the company with a recall bill exceeding the $3 billion-plus already estimated. Automakers, including Honda and Toyota, which have to date been paying for replacement air bags, could also take such a finding as a cue to cut off financial lifelines to Takata.

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Separately, Honda has hired U.S.-based engineering consultancy Exponent to investigate the cause of the air bag ruptures, and is also part of a consortium of automakers that has commissioned Orbital ATK to test Takata air bag inflators.

Takada has been widely criticized for keeping a low profile even as the air bag crisis escalated, and automakers accused Takata of mishandling and manipulating safety data.

In his first media appearance in June 2015, more than a year after the recall crisis erupted, Takada apologized for the defective air bag inflators, saying that staying on to lead the company was the appropriate way for him to take responsibility.

A third person close to Takata said Takada could take responsibility for "a range of issues" around the air bag crisis at Friday's meeting with automakers, potentially a first step towards his departure.

Family business

Takada, 49, joined the family business straight out of college in 1988 and has been CEO since 2013. If confirmed, his standing down would be the highest level departure at Takata in a scandal that dates back to 2008.

In late-2014, Takata's then president and chief operating officer, Stefan Stocker, resigned. The Swiss national had been brought in from supplier Robert Bosch to increase transparency at the Japanese firm. His roles were later taken over by Takada.

Those who have worked with him describe Takada as quiet, thoughtful and analytical - in contrast to his ebullient father, Juichiro, who built Takata into Japan's leading auto safety manufacturer. He died in 2011.

"If your dad was a legend and one of the founding fathers of the global auto safety industry, that's a lot to live up to," said Scott Upham, president of Valiant Market Research, who worked at Takata in the 1990s.