Possibly the death nail in Takata’s airbag inflator business could mean major headaches for franchised dealers and their service departments.

Under the Amended Consent Order issued to Takata this week, the National Highway Traffic Safety Administration (NHTSA) is expanding and accelerating the recall of Takata air bag inflators. The company is required to make a series of safety defect decisions that will support vehicle manufacturer recall campaigns of an additional estimated 35 million to 40 million inflators, adding to the already 28.8 million inflators previously recalled.

NHTSA officials explained on Wednesday afternoon that these expansions are planned to take place in phases between now and December 2019. The expansions mean that all Takata ammonium nitrate-based propellant driver and passenger frontal air bag inflators without a chemical drying agent, also known as a desiccant, will be recalled.

The decision follows the agency’s confirmation of the root cause behind the inflators’ propensity to rupture. Ruptures of the Takata inflators have been tied to 10 deaths and more than 100 injuries in the United States.

As horrific as those death and injury numbers are, the sheer volume of vehicles to be repaired from most major automakers left Kelley Blue Book analyst Mark Williams searching for answers as to what complications might be ahead for franchised dealerships.

“I think it’s going to be really challenging for the dealers,” Williams told Auto Remarketing less than an hour after NHTSA made its announcement on Wednesday afternoon.

“If we just look at what’s happened with the initial 28 million, it took (regulators and automakers) a while to come up with a strategic plan on how they were going to help dealers,” Williams continued. “Obviously, there’s going to be a big financial hit. They’re doing a stop-sale on any of those vehicles in addition to the fact that there are depreciation costs when those vehicles are just sitting on the lot. That’s something dealers are going to have to account for in addition to the frustrations that anybody who currently owns those vehicles is going to have.

“Obviously there’s no real solution that’s in place,” he went on to say. “I would expect that the dealers are going to be in a bind at this point.”

Williams mentioned that some dealer support has come from automakers such as Honda and Acura. He noted that in March those OEMs offered franchised dealerships with financial assistance while vehicles with stop-sale designation still sit on the lots and floor plan books.

If dealers are looking for assistance from regulators, perhaps they should consider what NHTSA Administrator Mark Rosekind said when taking a handful of questions following his prepared remarks at the agency’s headquarters in Washington, D.C.

“I’m going to make this one personal,” Rosekind began. “My family has a vehicle with a Takata inflator sitting in our driveway. I fully understand the frustration. We are checking weekly to see when those parts are going to be available.

“We have previously suggested to talk to your dealer to try and get a loaner and to be in contact as much as you can,” he continued. “At the very least, I would say owners should be checking every week to see when supplies are available. Then get that inflator replaced as soon as possible. Make sure you’re in touch with that dealer at least once a month that the pressure is on for them to see what they could do.

“We have recommended trying to find a loaner,” Rosekind reiterated. “I have tried every which what to look at the Safety Act. NHTSA has no authority to require that loaners be made available. If there was any way we could have done that we would have. Honestly I tell my wife and kids the same thing I’m telling everybody, for all of the frustration we need to figure out to make sure you’re safe. We’ve got to stay vigilant so as soon as it’s available it gets fixed.”

Unlike the tragic circumstances involving General Motors with ignitions in older models or Toyota with units involved with unintended acceleration, Williams pointed out how franchised dealers from nearly all brands are going to be facing these challenges.

I think it’s a little bit more complicated here. Not to downplay any of the other ones, obviously there were deaths with the other safety recalls as well,” Williams said. “But with this one it does get a little bit more complex because we’re talking multiple OEMs in the industry. This is not only a GM issue or a Toyota issue or a Honda issue. This is essentially an automotive industry issue.

“Hopefully we’ll see the industry as a whole band together and support any initiatives that help a lot of the OEMs get out of this bind,” he continued. “Takata is only going to be able to do so much. I know they’re already reaching out for sponsors to get some help with supply issues along with some capital. But I would imagine that once all of this is done, I don’t foresee Takata playing in the inflator space anymore.”

Williams also sympathized with the plight dealers are likely to face.

“Just looking back to the Volkswagen occurrence that’s just happening now, too, I’m sure there are a lot of frustrations at the dealer level,” he said. “This is on a much larger scale with many more brands involved and a lot more vehicles that are impacted. It’s going to be extremely tough. I think there’s going to be a lot of frustrations on both sides, from the consumer as well as the dealer. Dealerships are just going to need to be prepared to have angry customers and be very patient because this isn’t something that’s going to be solved overnight. In fact, it could be months, potentially even years to get all of it resolved.”

More details from regulators

NHTSA indicated that the agency and its independent expert reviewed the findings of three independent investigations into the Takata air bag ruptures and confirmed the findings on the root cause of inflator ruptures. A combination of time, environmental moisture and fluctuating high temperatures contribute to the degradation of the ammonium nitrate propellant in the inflators. The agency explained such degradation can cause the propellant to burn too quickly, rupturing the inflator module and sending shrapnel through the air bag and into the vehicle occupants.

“The science clearly shows that these inflators become unsafe over time, faster when exposed to humidity and variations of temperature,” Rosekind said. “This recall schedule ensures the inflators will be recalled and replaced before they become dangerous, giving vehicle owners sufficient time to have them replaced before they pose a danger to vehicle occupants. NHTSA will continue to evaluate all available research and will act quickly to protect safety.”

NHTSA noted that it will also consult with affected vehicle manufacturers before revising the Coordinated Remedy Order that governs the accelerated program to obtain and install replacement inflators. The Coordinated Remedy Program will continue to ensure that replacement inflators will be made available to highest-risk vehicles first.

The revised Coordinated Remedy Program, to be announced this summer, will detail the updated vehicle prioritization schedule and the schedule by which manufacturers are required to procure sufficient supply of replacement parts to conduct the required recall repairs.

This is the largest and most complex safety recall in U.S. history. Under the Coordinated Remedy Program, NHTSA and manufacturers have committed to seek a 100 percent recall completion rate.

“Everyone plays a role in making sure that this recall is completed quickly and safely, including manufacturers, suppliers and vehicle owners themselves,” Rosekind said.

Additional impact

Beyond what dealerships might be facing, KBB touched on Takata’s long-term prospects.

“It’s hard to imagine Takata surviving this recall. But if the company fails, it will only lengthen the time it takes to resolve this issue,” Kelley Blue Book senior analyst Karl Brauer said.

Chip Magid, a partner at the international law firm Dorsey & Whitney who works out of its Washington, D.C. office, helps his clients to reduce their liability risks and to navigate the federal regulatory system, particularly in connection with the U.S. Consumer Product Safety Commission. Magid has been following this large recall closely, considering the political aspect of the development.

“The recall expansion focuses on newer air bag inflators that don’t appear to pose a safety threat at the moment. But NHTSA has determined that the inflators will degrade over time – particularly in warm and moist environments.  So Takata has agreed to recall airbags by region, starting with the warmest and most humid areas, where degradation will occur fastest,” Magid said.

 “A typical recall involves products shown to pose an immediate risk of harm. This recall expansion is somewhat unusual, in that NHTSA has determined that a problem is likely to occur at various points in the future and is acting prophylactically,” he continued. “The inflators in some of the newly recalled airbags aren’t expected to degrade to the point of posing a safety risk for a decade or two. But NHTSA’s taking no chances, and has directed that all of the non-desiccated airbags be recalled by the end of 2019.

 “NHTSA is under tremendous pressure from Congress to show that it is acting in the public interest and is not too cozy with industry. This recall expansion is another manifestation of NHTSA’s response to that pressure,” Magid went on to say.