Commentary

Feds Looking Into Fatal Airbag Failures In Hyundai, Kia Crashes

The National Highway Traffic Safety Administration is investigating the failure of airbags to open in crashes involving certain Hyundai and Kia automobiles. Four people died and six others were injured in the six crashes involving 2011 Hyundai Sonata midsize cars and 2012 and 2013 Kia Forte compacts. 

“The problem has been traced to electrical circuit shorts in air bag control computers made by parts supplier ZF-TRW. NHTSA now wants to know if other automakers used the same computer,” reports the AP’s Tom Krisher. 

“ZF-TRW said in a statement that it is prevented by confidentiality agreements from identifying other automakers who bought its air bag control computers. The company said it is working with customers and supports the NHTSA investigation,” Krisher continues.

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The answer to that question, though, is key to determining the potential impact.

“Analysts said Hyundai could face serious damage if it was found to be responsible but that if ZF-TRW was found to be at fault, there could be wider repercussions for the global auto industry,” Song Jung-a reports for Financial Times.

“If the airbag control unit of ZF-TRW is found to be defective, this could be a second Takata case,” Meritz Securities’ Kim Joon-sung tells Song. “But if this is found to be the carmakers’ design issue, this would undermine their brand value and lead to punitive fines.”

ZF-TRW was formed in 2015 when German company ZF Friedrichshafen AG acquired the Livonia, Mich.-based TRW Automotive Holdings.

“As part of the investigation, which is in the preliminary stages, the NHTSA said it would look into whether any other automakers used the same or similar airbag control units as those supplied by ZF-TRW, and whether these vehicles also indicate similar airbag problems,” FT’s Song writes. 

Both automaker stocks were battered Monday with Hyundai dropping 4.8% and Kia losing 3.7%. 

“What I am concerned about is that the recall will be expanded to other markets,” Ko Tae-bong, an analyst at Hi Investment & Securities, tells Reuters’ Hyunjoo Jin and Dahee Kim.

“Ko estimated the U.S. recall could cost as much as $575 million if airbags were replaced in 425,000 vehicles under review and the automakers were found responsible for the problem,” they write, although Kia told South Korean regulators that the models sold in the domestic market were not affected.

“Four of the crashes in question involved Hyundai vehicles and two of the crashes involved Kia vehicles, the [NHTSA ] document states. According to a statement from Hyundai spokesperson Jim Trainor, the company knows of ‘three rare and unique accidents where airbag control circuitry was confirmed to be damaged, and a fourth accident is under investigation,’” writes NPR’s Jenny Gathright.

“Hyundai was already aware of problems with airbag control units as of Feb. 27, when the company filed a defect information report that led to a recall of 154,751 model-year 2011 Hyundai Sonatas. Trainor confirmed to NPR that the NHTSA investigation opened yesterday is directly related to this recall, and Hyundai will notify all affected vehicle-owners about further recalls by April 20,” Gathright continues. 

Kia, which sells similar vehicles, has yet to issue a recall, the AP’s Krisher reports, and it issued a statement saying it “will act promptly to conduct a safety recall, if it determines that a recall would be appropriate.” 

“Airbags already are linked to the largest and most complex auto-related recall in U.S. history — the one that ultimately forced Japan's Takata to seek court protection from creditors after its devices were linked to at least 17 deaths. Unlike the Takata situation, which involved exploding airbags with shrapnel, the latest probe involves devices that failed to deploy at all,” point out Bloomberg’s Michelle Kaske and Naureen Malik for Australian Financial Review.

"This is just the start of an investigation — we don't know how much it will be expanded yet,” Lee Hang-koo, a senior researcher at state-run Korea Institute for Industrial Economics & Trade in Sejong City, South Korea, tells them. “It is surely bad news for Hyundai, which is already seeing sluggish sales in the U.S.”

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