Cliff Notes as promised. Takata as a company will probably be ruined once all is said and done.
They're donezo. Something not mentioned in all this is that they were 18-24 months out on the recall before more than doubling the pot. Entire factories are being repurposed by other vendors to crank out new-old Takata airbags. My wife's Fit is part of the recall; as it spent 5 years living in swampy-ass Marina Del Rey we figured we probably oughtta look into it. We were told that, although the recall came active in March, there would be no airbags until October at the earliest but if we felt strongly about it, they'd rent us a car. So on the one hand, Honda is going to bill Takata for renting us a car for seven months minimum. On the other hand, do I want to turn our Fit into a lawn ornament? I mean, 70 million vehicles, 100 injuries, 10 deaths. Frankly, my en fuego dishwasher is more lethal (it quit working again, by the way - fuck Bosch in the neck). But if I had a place to park the fucker that wouldn't kill the lawn I'd do it. It doesn't take many of "me" to make this an inconceivably expensive recall.
I'm sure there's more to it, legally and logistically, but I'm kind of surprised that we've yet to reach the point where the proper organizations have said "Okay, you know what? If your airbag says 'Takata,' it's being recalled." It really feels like that's the direction we are headed. I'd also half bet Takata and their lawyers are trying to see what they can do to shuffle some paperwork around, maybe restructure the company or something, to limit the amount of financial fallout. I know when the whole ignition switch fiasco cane about with GM, they tried to say "Well hold on, that was pre-bailout GM that was responsible. We are a completely different company now, legally speaking, so it's unfair to hold us responsible for the decisions made by old GM." The fact that tactics like that work sometimes is kind of mind boggling.
I dont know why they just dont declare bankruptcy and restructure under a new name. They could shed all the legal liability and call it a day since they really cant afford to replace 85 million airbags. Damages will be in the 3+ billion dollar range and their reputation is shit as well. I guess if you are an executive you try to hold out for as long as possible and keep collecting those big bucks.
"April 13, 2016: Regulators state that there are 85 million potentially defective, unrecalled Takata airbag inflators that will need to be recalled—unless Takata can prove they are safe. So far, the recall has included 28.8 million airbags in the U.S." "It will be 2019 before there are enough Takata airbag replacements" "Takata wants a sugar daddy to pay for its massive airbag recall" Well, that one makes sense. They were hit with a billion dollar fine, they went through with the recall, they faced "deferred prosecution" and they basically agreed to cooperate in order to get the cars fixed. And keep in mind - the US is recalling all these airbags. These are primarily Japanese cars and the Japanese portion of the recall is tiny. That's just trade. Welcome to the big leagues.I'm sure there's more to it, legally and logistically, but I'm kind of surprised that we've yet to reach the point where the proper organizations have said "Okay, you know what? If your airbag says 'Takata,' it's being recalled."
It really feels like that's the direction we are headed.
I'd also half bet Takata and their lawyers are trying to see what they can do to shuffle some paperwork around, maybe restructure the company or something, to limit the amount of financial fallout.
I know when the whole ignition switch fiasco cane about with GM, they tried to say "Well hold on, that was pre-bailout GM that was responsible. We are a completely different company now, legally speaking, so it's unfair to hold us responsible for the decisions made by old GM."
The fact that tactics like that work sometimes is kind of mind boggling.
True story? I'm kind of proud that I was somewhat right for three out of three guesses. So snoodog says they should declare bankruptcy to get out of this whole ordeal, but I kind of think that it's too late for that, that they're in too deep. I wonder if maybe had Takata forseen this happening, they could have split up their assets, sell them to a bunch of fake companies, and then have them all merge to make a "new" company that's basically Takata under a new name. It sounds far fetched, but I've seen things like that happen on a smaller scale. Hostess Brands for example declared bankruptcy to get out of their obligations for union contracts and pensions. It also allowed them to cut ties to a bunch of assets that were becoming nothing more than dead weight.
Takata's gotta be Too Big To Fail. If they declare bankruptcy they disturb a massive supply chain for fourteen automakers, all of whom will demand sanctions and relief and it becomes an international trade catastrophe. If they reform and say "surprise! we're back!" the companies left holding the bag will sue the bejesus out of the new company. My understanding of Hostess is that the intellectual property and physical property were sold off under the approval of bankruptcy court. "Hostess" is still a company but it's a company the way Indian Motorcycles is a company - the brand was purchased by someone else and the original posse are gone. If Takata does this, they're "donezo" as I said initially... except nobody is going to bid for the Takata name. The only association consumers have with it is negative. It'd be like Ford bringing back the Pinto.
Huh. Looks like I'm still learning this. As a quick aside, how would you rate Business Insider as a news source? I find them to be pretty easy to digest, which I understand can be a double edge sword. Hostess is probably a pretty weird case, they're like a cross between AWG in the sense that they started out as a bunch of regional businesses from around the country working together and Kraft in the sense that it was a bunch of brands held under one umbrella. The more I try to learn about this stuff, the more I discover that there are so many different ways a business can be organized. Someone oughta start a taxonomy or something. If Takata really is too big to fail, I think whoever ends up taking care of them will do so begrudgingly. I might be wrong, but I think that Honda was one of their biggest customers and I could have sworn I read a press release that basically said Honda was gonna start getting their air bags elsewhere. That's a pretty big kick to the stomach when you're already down.
I think the bigger problem is that there probably isn't a lot of excess airbag supplier capacity in the supply chain. Its very difficult to get rid of a supplier like Takata because all the existing companies are already at capacity and they cant bring any new capability online in less than 1-2 years due to long lead time items and Takata having already locked in the sub component manufacturer capacity. The world only really produces enough subcontinents for existing auto manufacturing. Since Takata hasn't removed themselves from the supply stream they are still producing airbags (even if nobody is buying them) there aren't enough subcomponenets out there for the other manufacturers to build many more bags even if they wanted to. It doesn't really make sense for the other suppliers to scale up MFG capability beyond what is already existing for a temporary need like this so the other makers may be outputting 10-20% extra but would have difficulty covering the gap. Takata basically has its customer hostage because now that the recall has been issued there will be lots of angry customers looking for Airbags that cant get them. Demand for airbags will be at an all-time high while supply will be impossibly low (without Takata). So they will be able to negotiate for all sorts of concessions. They may even be able to get the manufacturers to pay for facility upgrades to prevent the "problems" with previous bags. The big companies will likely for a lot of the engineering hours to fix the problems because they cant live without the airbags.
Business Insider is what Henry Blodgett built after he was banned from trading forever for insider trading and manipulation. It's a blogspam content factory like any other with some serious biases that's easy to digest by design. Think of it as the clickbait version of Forbes and you aren't far off. There's also no easy way to figure out your taxonomy because corporate structure is state-dependent. That's one reason this whole "Panama papers" thing isn't getting a lot of play in the US - Delaware is every bit the tax haven Panama is, as is Nevada. Most everybody is having to switch from Takata to other vendors. Takata is swamped for the foreseeable future making airbags to replace the shit they already sold. From what I understand there's like a legit war effort underway to plow through this mountain of recalls and it's involving a half-dozen manufacturers already. It's funny. You look at the numbers and Japan's doing...okay... but Mitsubishi is in the tank, Takata is in the tank, Sharp is in the tank... and their pensioners are buying safes to hoard paper bills in. Kinda makes you reconsider all news sources.
Tagging snoodog on this too. I wonder about Takata being too big to fail and what it might mean for the company investment wise. If their future is in doubt, their stock is probably really rough. Someone could probably buy a bunch of shares dirt cheap, ride this whole thing out, and then cash in big once they get "bailed out." During that whole time we were having trouble with American car companies, Ford was trading at about 3 bucks a share. Now they're doing just fine. I wonder if though, similarly maybe Takata will fall. Someone could position themselves just right to buy all of their good assets dirt cheap and they basically have an air bag company, pre-assembled for them at a massive discount. I'll have to look into Japan's economy when I get some time, but I figure something must be going right for them. Or maybe they're fudging their numbers so they look decent in comparison to companies from places like China, South Korea, and Germany. If I remember right, China recently got caught lying about how well they were doing. Business Insider might be a stepping stone for me. I think maybe as I learn the jargon and the concepts and such, other sites will be easier for me to figure.
mk Japan is in a rough spot. Their demographics are aging at an impressive pace, and because you can have two or three generations born on Japanese soil without naturalization they have no immigrant growth to buttress them the way the US and lots of Europe does. They also handled their economic crisis of the '80s poorly, leading to The Lost Decade which is rolling up on 20 years. The kids that grew up in the Lost Decade don't have very good jobs, either, which means the graying population are still the breadwinners. The Abe administration is attempting to counter these two economic calamities with Abenomics in an attempt to spend themselves out of the problem. It has not, as of yet, been successful. Japan is also a nation of savers, which is great for personal stability but not so great from an economic standpoint (you want all that money out there rubbing against itself and making babies). If you felt like betting on Japan you'd be in the minority. You're right about Ford, though. I know a guy who made a killing on it during the recession and his mom has been at GM for 30 years. The question you're posing is the very same as the rest of the market.
Man. Bad lending practices leading to a troubled economy. The established generation holding onto the good jobs. Stagnant wages. Japan sounds a bit like America in that sense. I know stereotypically, Japan is a bit xenophobic, but maybe they really ought to consider trying to change some policies to attract immigrants if they could actually make a difference. I don't know how to look up most of this stuff, but it seems like not all of Japan's businesses are struggling. According to the ticker on Google, Fuji Heavy Industries has been growing steady in stock price over the past five years. Honda, Toyota, Sony, and Mitsubishi are a bit like roller coasters (though if I had money and a time machine, I'd have bought some Toyota stock in 2012). Takata's stock? They're in the tank at this point. In a little over two years, it's worth 10% of it's peak price of 3,200 Yen in Jan of 2014. I wonder if it'll go lower . . .
Nobody is predicting the end of Japan. However, the common narrative is a sundown. Their demographic nightmare is occurring. The reason they pushed so hard into robotics and caretaking is they have a massive generation that's getting old (and is likely to live longer than anyone else on the planet) and they simply don't have the manpower to care for them. They're automating as much as they can. And they're more racist and xenophobic than most Americans really want to think about. Takashi Miike's Dead or Alive (a movie I will not recommend to you, in case you were wondering) is about the prejudice against the burakumin born full-blooded Japanese in China during WWII.
Japan is having a governance problem. Their government has been making bad decisions and covering up fuck ups for the past 20-25 year now and their culture of respecting people in charge is enabling unprecedented levels of fuckupery. Abeanomics is a slow moving train wreck for Japan and has basically robbed the older generation of much of their savings. For example BOJ owns half of the ETFs in Japan and 1/3 of the bond market. They pushed down yields so low that people basically have to work till they die because there is no way to live off savings without draining them down. So a combination of increased people needing jobs and not much job growth has been bad for japan. Also like us their leaders in government and industry are so damn old that they cant really get their head around the major demographic technological changes that are happening and take any meaningful action to fix problems.
How does Japan's bad decisions over the past few decade's compare to America's bad decisions over the past few decades. I might be reading a bit much into it, but the way that you and kleinbl00 talk about things, from debt and generational differences to government mishandling, it seems like there's a lot of similarities to our situations. Or am I reading things wrong?
I always though the bad decisions were similar enough that a repeat of the Japanese style stagflation would happen state side. In 2009 I bet that the US would experience a Japanese style lack of growth, but I didn't really count on the ability of the FED to prop up the markets the way it did. I think they are kind of running low on Ammo though they the probably still have a few clips left so dont count those guys out when it comes to market distortion. The BOJ is really paving the way in what the markets can live with and is the working trial for what the other federal banks can get away with. They are also the lowest on ammo since they have been making the most drastic manipulation moves. If we start seeing market manipulation action from the BOJ fail in any noticeable way then the end game could be in sight globally. So far though they have shown that markets will accept both 0 and negative interest rates so they are really a working demonstration of how far one can manipulate the economy before investors tell them to pound sand. Fundamentally though the BOJ has created a huge debt bomb that cannot be unraveled using conventional means so Japan may also end up being the first trial country for some sort of eventual debt cleanup event. Its probably either them Italy or Spain. The world seems pretty content keeping Greece on life support but I don't think the European powers could support 2 failed states in the euro-zone for long. Either way I expect someone else will be the test case for what ever method is used to deleverage these nations. There are some fundamental differences with Japan and the Us. Japan is a nation of savers and the US is a debt fueled nation. The USD is a reserve currency status and the US has lesser demographic problems (but still there is a boomer problem). In spite of those differences Japan has kind of served as a model of the economic policy that has happened in the US over the past 7 years so its not surprising that the results are similar. They didn't have a huge market bounce like we did but they had the same wage stagflation coupled with reduced buying problem that we have had here in the US. Their people have suffered as a results and they also had a lost generation.
Depends on what you mean by too big to fail. In your context of equity positions not getting wiped out I'm not sure. BP was too big to fail when deepwater horizon was happening, but Takata could easily fail into restructuring and wipe out your equity position. The company may still exist after that but your stocks will be worthless.
Sounds familiar. Traders keep buying old GM stock, despite warnings The company may still exist after that but your stocks will be worthless.
My memory is hazy, because at the time I was in the car mentality of "lol! v-tec sux Ford's 4.6 v8 dix" "Toyota, El Camino, GNX blah blah blah." So, I'm probably not the most reliable source for this. But as I remember it, it was post bailout, either when the government was taking over GM and its assets or when old GM was transitioning into new GM. From what I understand, contracts were being rewritten, loans and debts were being renogotiated, assets were being bought and sold, and people thought it would be a good idea to buy GM stock because it was cheap. The problem was, GM as a company was gonna become a completely different entity, legally speaking, so for some reason GM and the government said GM stocks weren't good for anything, so they told people (multiple times actually) to stop buying GM's stocks. If that's not confusing, the real question I have that maybe you could answer is why they didn't either A) stop selling the stocks altogether or B) make the stocks worth a piece of new GM? Both of those options sound reasonable to me.
My guess is that there was so much crazy shit going on about that time that it was the ad-hoc solution arrived at by the SEC, GM and the NYSE (think GM trades on NYSE). There's an HBO movie called Too Big To Fail that, while not the best overview of the financial crisis of 2008, paints a much better picture of the regulatory shitstorm that ensued than any of the other books. While The Big Short very much shows the perspective of the traders, Too Big To Fail is pretty much a top-down view from the perspective of Ben Bernanke and Hank Paulson. Remember when we airlifted pallets of $100 bills into Iraq for no demonstrably good reason? The 2008 bailout of General Motors et. al. had a lot of the same charcteristics.
So, basically, they were making stuff up as they go along while at the same time showing off that they could do things just because they could? I actually find that somewhat comical for some reason. In all seriousness though, I hope we've learned some kind of lesson out of all of this. It'd be pretty hard not to.
The problem is that economics is a social science so lesson learned is subject to fashion. They will teach you in History about how the New Deal saved America; they will teach you in economics that it prolonged the depression, but only if you get a teacher who believes Friedman. This is why Piketty went back to France.
All good points I agree with. Additional to learn lessons one needs to admit failure, the the moment japan is touting their economic policy as a success. The fashionable lesson right now is that bailouts and helicopter money drops work to boost the economy.