As Takata Corp comes under scrutiny for air bag defects, bankers are weighing up the potential fallout for the Japanese family behind the 81-year-old company, and the third-generation CEO who controls it.
As one reference for what Takata may face, Toyota Motor paid at least $2.6 billion over a U.S. recall crisis four years ago linked to four deaths, all in one car. Defective Takata air bags have been linked to five deaths; four in the United States and one in Malaysia of a pregnant woman.
Bankers with relationships with Takata are brainstorming financing proposals - though not yet with Takata directly - as recall costs increase and lawsuits loom. Raising new capital could threaten the control of the Takada family, potentially boosting governance and oversight.
The Takada family holds about 59 percent of the world's No. 2 air bag inflator maker, but a 60 percent drop in the company's share price this year - knocking $750 million off the value of the family-controlled investment - means it would take just $150 million of fresh equity to dilute that holding to below half.
"Some of my fund clients are calling to see whether we can arrange meetings with the company," said one investment banker, who asked not to be named. "They're willing to inject equity."
RENESAS-TYPE RESCUE?
A second senior banker said another long-term possibility may be to recapitalize Takata under new management with investment from automakers and a government fund - similar to the 2012 bailout at Renesas Electronics. He said that scenario had not been put to potential investors or Takata's board.
Takata's chief financial officer, Yoichiro Nomura, played down immediate financing concerns at a closed-door meeting with analysts last week, saying the company had not yet paid out most of the $774 million it has set aside for recall-related costs, according to an account by one of those at that meeting.
"The company says it has set aside enough to cover much of the recalls, but it's uncertain how this crisis will end," said Tadashi Ono, a senior analyst at Japan Credit Rating Agency, which has put its single-A rating on Takata on negative watch.
More than 17 million cars have been recalled worldwide since 2008 for defects in Takata air bag inflators, which can explode with excessive force and shoot metal shards. Takata supplies over a fifth of the world's air bags.
A U.S. Senate committee has scheduled a hearing on Thursday to solicit testimony from Takata on the defects and the company's response.
"THE SON" AND "BIG WIFE"
Employees and former employees of Tokyo-based Takata say the company retains the feel of a family-dominated firm.
CEO Shigehisa Takada's grandfather founded Takata in 1933 as a textile mill in western Japan. Shigehisa became president in 2007, aged 41, and moved to the top executive post after the death in 2011 of his father, Juichiro, who built the company into an auto safety giant. Shigehisa's 74-year-old mother, Akiko, a former Takata executive, heads the non-profit Takata Foundation but remains vocal in her role as a special adviser to Takata, people who have met her say.
Managers refer to Shigehisa as "the son" or "Shige-chan", using a familiar, short form of his name and a suffix normally reserved for children. Some call Akiko "O-okusan", or "big wife", one source said, underscoring her influence at Takata.
Takata last year named Stefan Stocker, a Swiss national and former Bosch executive, as president and chief operating officer tasked with improving oversight of global operations. Neither he nor Takada has appeared in public since the annual shareholders' meeting in June, which was closed to media.
On that issue, Takata said: "We will take appropriate steps at the appropriate time." The company added that it had no fundraising plans for now. Akiko, Shigehisa and Stocker could not be reached for comment at their offices or homes.
According to Thomson Reuters data, Shigehisa is Takata's top individual shareholder with 2.89 percent, while his mother holds 2.06 percent. About 52.1 percent is held by TKJ KK, an investment firm that lists the mother and son as board members.
Another 1.5 percent is held by ST KK, represented by Shigehisa and established as an investment management firm in October 2013, a month after the third Takata-linked air bag death. Its address is registered at a Tokyo residential tower.
TKJ and Takata Foundation, along with several other Takata companies, share an address at a Tokyo office building with a single receptionist. Akiko and Shigehisa rarely come by, the receptionist said.
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