From airbags to autonomous, there could be commercially fatal risk to suppliers, thinks Graham Jarvis.

Safety first is a mantra that many of us aspire to achieve but it’s not one that’s always maintained. In commercial terms, an inability to put it at the heart what you do as a company can lead to either temporary or permanent reputational and financial damage. This is clearly shown by the Takata airbag fiasco, which filed for bankruptcy protection in Tokyo, Japan, and in the US in June 2017. The firm’s assets are now being bought by its rival, Key Safety Systems, for $1.6Bn (£1.23Bn).

Frightening figures

Safety equipment manufacturers must get it right, because the loss of one life or the causing of bodily harm because of safety equipment failure is a step too far. Sadly, this commercial disaster was created by its faulty airbag inflators; they are linked to the deaths of at least 16 people and it is estimated that a further 180 people have been injured by Takata’s airbags. They had the alarming potential to explode, shooting out shrapnel at the persons they were meant to protect from injury.

Eddie Cunningham adds in his Irish Independent article: The Frightening Figures Behind Takata’s Airbag Fiasco, of 28th June 2017 that tens of millions of vehicles were affected by the faulty airbag inflators. It is, therefore, no wonder that the company became swamped by lawsuits and product recall costs – and particularly as the affair has affected 19 car manufacturers. Yet Cunningham also reveals that £1Bn from the sale of the business will go towards “settling criminal damages for concealing inflator problems”. This allegation makes it sound like Takata forgot the purpose of their airbags by putting their own commercial interests before those of car drivers and their passengers.

Touchy subject

It’s certainly a touchy subject, attracting little appetite from most of the car manufacturers for making any comments about what can really be learned from the fiasco and its outcomes. However, Simon Branney, car PR section manager at Honda offered the following statement in June 2017:“The proposed settlement announced on May 18, 2017 concerns class action lawsuits in which attorneys have made claims that the Takata airbag inflator recalls have caused economic losses to owners of affected vehicles and that the settlement will provide rental cars for affected customers – something Honda already makes available to its customers.

“While Honda continues to participate in the legal processes associated with these class action lawsuits, Honda central focus remains on taking care of our customers. This includes a significant and ongoing effort to encourage owners of affected vehicles to come to an authorised dealer to replace recalled airbag inflators. As a result, Honda has the highest Takata airbag inflator recall completion rate in the industry with nearly 57% of repairs completed.

“In addition, we have made loaner and rental cars available as necessary to those customers who may have been inconvenienced while awaiting the replacement of a Takata airbag inflator and Honda has secured sufficient replacement part supplies for all affected Honda and Acura models, ensuring that recall repairs can be quickly completed.”

Autonomous future: Volvo safe

Yet, Ben Foulds, a spokesperson for Volvo cars added: “I will decline the opportunity to comment on this occasion because the Takata recall was an industry-wide issue that didn't affect Volvo Cars.” That’s fair enough in Volvo’s case but the reluctance of other car manufacturers to comment presents more questions than answers. One would have thought they’d all want to put the record straight to ensure that they communicated to their customers that they are putting their safety first. However, whenever there is talk about law suits even the most friendly and helpful person tends to run away.

It’s nevertheless good to hear that Volvo wasn’t affected by the scandal - particularly because ‘Volvo stakes its claim to a driverless future’. Such an autonomous car future nevertheless raises questions about who would be responsible for safety equipment failure in an autonomous car world. The perceived wisdom at present is that liability will fall on the car manufacturers but the Takata airbag scandal seems to put this into question. Yet manufacturers should do their own due diligence to ensure that the airbags they put into their vehicles will work without causing death and injury.

It must be said that this principle has to apply whether or not the discussion is about traditional, semi-autonomous or fully autonomous vehicles. Moreover, liability should perhaps be shared in some cases. Yet there is clear evidence that points the finger at Takata being totally liable for the failure of its airbags to work correctly, without exploding in anyone’s face.

Big names embroiled

Interestingly, a full list of the affected vehicles can be on the Car and Driver magazine’s blog. BMW, Ford, Mazda, Mitsubishi, Toyota, Nissan, Nissan, Ferrari and Chrysler are among the car manufacturers embroiled in the saga. The blog also provides a detailed 30-page timeline of events that have led to Takata filing for bankruptcy protection.

It shows that the whole tragedy began back in 2004. For example, it cites aNew York Times article of 7th November 2014, which claims that Takata knew about the faults. Although it denied the claims made in the article, questions still remain over whether there was a conscious cover-up.

5 lessons and findings

Akerman’s Gail Gottehrer has already raised the spectre of how legal liabilities could impact on suppliers to manufacturers of autonomous vehicles telling TU-Automotive: “If you are dealing with a carmaker such as Volvo, they can tell people ‘take it or leave it’. Their agreement terms will tell the supplier he will be responsible for all these things if something happens. So when Volvo gets sued, because it’s the only brand the victims will know, they won’t know the suppliers, they will say ‘you will indemnify me. You will be brought into the case and you will pay any hit that Volvo gets and you will need adequate insurance’.”

Using the airbags example, David Olive, a business columnist for The Toronto Star, therefore offers five lessons that can learned from the saga. He says: “The vaunted supply-chain systems employed in the private sector can go awry,” making the pace of replacing faulty airbags very slow. The recalls also added to the complexity and so essential more stringent testing should occur before any safety equipment enters the supply chain. Car manufacturers should also be closely involved with product testing too. This will verify that, and particularly with regards to autonomous vehicles, they can be sure that they are safe.

His second lesson is that businesses can and will lie if they feel it will protect their commercial interests, but in the long run such lies may emerge and cause more damage than would have occurred if they had simply spoken up about the issues earlier on. He argues that even big car manufacturers are liable for making their own share of shoddy goods and his fourth lesson is that not even fines are a sufficient deterrent to corporate malfeasance. He also argues that governments will often be overly tolerant and so they need to more to ensure that safety really does come first.

[Auto. Jarvis.2017.06.16]

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