Lax corporate culture caused Takata’s downfall


TOKYO – Shigehisa Takada was adamant as usual. Even at the June 26 press conference where he announced Takata’s bankruptcy, the CEO of the beleaguered airbag supplier refused to acknowledge any fundamental quality issues with the company’s products.

“It’s a mystery why the abnormal ruptures [of the air bags] happened, “Takada said at the press conference.” We still have a hard time understanding [the cause]. “

Still, Takata’s downward spiral is no conundrum.

Around 2000, Takata began using ammonium nitrate as a solid propellant to inflate its airbags. Ammonium nitrate is a rather volatile compound used as a component of explosives, but it has replaced sodium azide, which is a toxic chemical.

Takata adopted ammonium nitrate because it was cheaper than other compounds used by its competitors as propellants in airbag inflators and also allowed the company to downsize its products.

However, concerns have been expressed about the delicate properties of ammonium nitrate, which can seriously degrade when exposed to environmental factors such as humidity and temperature changes.

Aware of the risks, Takata has repeatedly tested worst-case scenarios based on safety standards far stricter than the requirements of automakers, according to the supplier.

Takata’s management team at the time was involved in the process of choosing the chemical used to inflate the airbags.

“We launched the product with confidence,” said Takada.

Scratch the surface

But the company’s manufacturing operations were not as flawless as executives claimed, and quality management was not sound.

Investigations into airbag manufacturing operations that Takata conducted after being first notified of a problem with its airbags by Honda Motor in 2005 revealed a series of errors in its plant’s production process. North America, such as poor humidity management and pressurization.

It was discovered that some aspects of Takata’s manufacturing process that are critical to safety were done manually. The company hired Samuel Skinner, a former US secretary of transportation, to lead an independent panel of experts to review its manufacturing operations. Based on his findings, Skinner called for a “change” in the “culture” of the supplier.

Then a slew of reports of faulty Takata airbags, which the company deemed to be good, emerged, prompting automakers to extend recalls even though the root cause of the problem was unclear.

Later, a US Department of Justice investigation found that former Takata employees repeatedly tampered with safety data provided to automakers.

These facts highlight major flaws in Takata’s corporate governance and illustrate how the company’s lax corporate culture has created fertile ground for unruly and misconduct.

From top to bottom

A former Takata employee attributes it to the dominant power of the founding family, which owns around 60% of the company’s shares. The family’s iron fist is hampering the company’s ability to identify and rectify issues with its organization, the former employee said.

Shigehisa Takada, who took over the reins from his father Juichiro in 2007 at the age of 41, wields “absolute” power within the company, according to the former employee. “[He] created an atmosphere that deterred even senior executives from arguing with him. “

Takata quickly globalized its operations in response to requests from Japanese automakers, who were its main customers. A side effect of such concentration was that the supplier got lost in keeping an eye on its overseas units.

In particular, the company’s American unit, which was at the heart of its airbag activities and represented more than 40% of the group’s sales, asserted its independence from the Japanese parent company.

An executive from a Takata business partner said, “I felt like Takata’s head office in Japan was not paying any attention to what the US unit was doing.

Automakers, for their part, have failed to respond in a timely manner to the problem due to their overconfidence in the quality of Takata’s products.

Explosives experts say all explosives degrade over time. Airbags use propellants – which are actually explosives – but there is no time limit for their use and no rule for their replacement.

Meanwhile, the average age of vehicles in circulation in Japan has climbed to nearly 13 years.

The auto industry will continue to face airbag safety concerns unless the automakers come together and develop a system to rectify the situation.

(Nikkei)


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