Can Takata survive the massive airbag recall?

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The risk is increasing of Takata facing a cash crunch as the cost of its global airbag recall spirals ever-upwards, analysts warn.

"Takata is in a very difficult position," SMBC Nikko's manager of credit research Takayuki Atake told CNBC by phone. The cost of the recall in the U.S., the largest in the country's history, could cost the Japanese airbag maker around 250 billion yen ($2.1 billion), which would "wipe out the company's capital and cash," he said.

Two years after the first deaths linked to defective inflators for Takata's airbags, the Japanese company agreed on Tuesday to double the number of airbags to be recalled in the U.S. to nearly 34 million vehicles. So far, six deaths and hundreds of injuries have been associated with Takata airbags exploding due to faulty inflators.

The value of the company's shares dropped by more than 10 percent on Wednesday and fell another 1.77 percent on Thursday. Its outstanding bonds are trading at 75 on face value, indicating investors are braced for the possibility of a default.

This recall will not, however, put an end to Takata's troubles: the company faces legal action in the U.S. and Canada, which analysts concede potentially pose an even bigger risk.

Tracking Takata's crisis management
Tracking Takata's crisis management   

"The biggest problem has yet to be resolved – the class action lawsuit (in the U.S. and Canada), and how much it will cost," BNP Paribas chief credit analyst Mana Nakazora said in a note on Wednesday.

Unknown consequences

With so much uncertainty ahead, Takata itself has yet to put numbers on the potential fallout.

Over the past two years, Takata has provisioned reserves of 93.2 billion yen to cover the cost of recalling 9 million airbag inflators.

Based on the 10,000 yen per unit booked on previous recalls, SMBC Nikko estimates the latest recall of 34 million vehicles would be in the region of 250 billion yen.

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With a cash pile of 69.1 billion yen and shareholders' equity of 147.2 billion yen at the end of 2015, the financial buffer is starting to look very thin, warned SMBC Nikko's Atake.

The latest recall not only "raises the possibility of negative net worth but would also jeopardize future funding liquidity, he said.

Bankrupts can't pay

Takata's survival will hinge on how much of the costs will be shouldered by the carmakers. In the past, the carmakers have agreed to spread out repayments.

There is still a reasonable chance the carmakers will also be liable to pay a part of the costs but what the split will look like is unknown, Advanced Research Japan auto analyst Koji Endo told CNBC by email.

However, Takata is certain to lose out in more ways than just on the balance sheet, said Endo. "It's obvious that Takata has to lose some market share to its competitors including Autoliv, TRW and Daicel in the long run."

What can probably be ruled out is bankruptcy, reckoned SMBC Nikko's Atake.

"A bankrupt company can't pay out damages, so we are assuming Takata will not be driven to the point of no return," he said.