TOKYO Japanese auto parts maker Takata Corp (7312.T) could face a $500 million charge and a net loss this year - its second in three years - as a widening recall of air bag inflators begins to raise worries despite its deep pockets.
Takata Chief Executive Shigehisa Takada apologized to shareholders at the company's annual meeting on Thursday but said the company was still tallying the costs of the recall, according to those who attended the closed-door session.
Automakers have recalled 10.5 million vehicles over five years to fix Takata air bags deemed at risk of exploding and shooting shrapnel at drivers and passengers, in what has become one of the five biggest recalls in automotive history. At least two deaths are alleged to have been caused by faulty air bags.
Creditors are not overly worried about the financial health of Takata, which has about $1 billion of cash on its books, but are closely watching the company, banking sources said.
The world's second-biggest auto safety parts maker faced questions from shareholders about potential losses and recall-related costs as well as its sluggish share performance at the shareholders' meeting, which came just days after the latest recall of 5.2 million vehicles.
Takata's shares have fallen nearly 30 percent since the start of the year compared with a 6 percent drop in Tokyo's benchmark Nikkei average .N225. They closed down 0.7 percent at 2,163 yen on Thursday.
"We shareholders have been proud of Takata and how its Japanese technology has been protecting people globally, so it was shocking to learn that people have died," said Shinji Sakagami, 45, a high school teacher who owns 300 Takata shares.
"I don't think I'll keep the stock much longer."
Honda Motor Co (7267.T) and Toyota Motor Corp (7203.T) were among four Japanese car makers joining this month's global recall over potentially flawed Takata air bag inflators made between 2000 and 2002.
Several analysts said they were assuming a cost of around $90 to $100 per recalled vehicle, based on replacement part prices, labor costs and other factors.
That could mean a charge of around $500 million for the year to next March in connection with this month's recalls, pushing Takata into a net loss for the year.
The company has forecast a 16 billion yen ($157 million) profit for the year to March 2015, after returning to the black last year from a record 21.1 billion yen net loss in the year to March 2013.
Last year, shortly after car makers recalled 4 million vehicles worldwide over potentially exploding passenger-side air bags, Takata took a $300 million charge, equivalent to a cost-per-vehicle of about $75.
The cost of the latest recall could escalate if a safety investigation in the United States finds evidence that driving in high humidity increases the risk of air bag explosions, as officials have indicated is possible.
Seven car makers said this week they were recalling more vehicles in the high-humidity regions of Puerto Rico, Florida, Hawaii and the Virgin Islands in the United States at the request of the National Highway Traffic Safety Administration to replace Takata air bag inflators. Honda is also recalling affected vehicles in Alabama, Georgia, Louisiana, Mississippi, South Carolina and Texas. Some safety experts said other automakers could expand recalls to those states as well.
NHTSA, when asked whether a national recall was necessary for the issue, said in a statement its probe was still underway and it would "take appropriate action based on our findings."
Separately, General Motors Co (GM.N) on Wednesday said it is preparing to recall about 33,000 Chevrolet Cruze sedans from model years 2013 and 2014 in North America with potentially defective Takata air bags that could fail to inflate.
The recalls could have a long-term impact on Takata's air bag business, said Koji Endo, an analyst at Advanced Research.
"There is the worry that the volume of transactions with vehicle makers could decline because of the recall," he said.
But he added: "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."
(Additional reporting by Ben Klayman in Detroit and Taiga Uranaka in Tokyo; Editing by Edmund Klamann, Raju Gopalakrishnan and Sofina Mirza-Reid)