Newspaper article International New York Times

Separation Isn't Casual for Japanese Companies ; Partners like Honda and Takata Form Ties That Extend Down Supply Lines

Newspaper article International New York Times

Separation Isn't Casual for Japanese Companies ; Partners like Honda and Takata Form Ties That Extend Down Supply Lines

Article excerpt

Companies in Japan form long-standing relationships that extend down manufacturing supply chains.

When a car manufacturer publicly questions the honesty of a business partner that supplies it with vital safety equipment, it is a sure sign that the relationship is in trouble.

When such a high-profile slap-down happens in Japan, where long and mutually protective ties between manufacturers and their suppliers are a central feature of business, it stings especially badly.

On Tuesday, the airbag maker Takata received just such a slap.

The Honda Motor Company dropped Takata as a supplier of airbag inflaters, saying that Takata had "misrepresented and manipulated" data from safety tests. Defective Takata inflaters are at the center of the largest automotive recall in history, linked to eight deaths - - all in Hondas -- and more than 100 injuries.

Honda is Takata's biggest customer, and has been buying its airbags since Takata started producing them in the 1980s. It is also a part owner: Honda holds 1.2 percent of Takata's stock, making it one of the company's largest single shareholders.

Such cross-shareholdings are common in Japan, encouraging loyalty between suppliers and their customers further along the manufacturing chain.

"It's a real crossing of the Rubicon in the relationship sense," Nicholas Benes, a Tokyo-based expert on Japanese corporate governance, said of Honda's decision to distance itself from Takata so openly and bluntly.

"It's a sign of increased awareness at Japanese companies of the problems you can get into with shareholder lawsuits, product liability lawsuits and so on," he added.

A Honda executive vice president, Tetsuo Iwamura, suggested the automaker was reviewing its shareholder relationship with Takata given Takata's shrinking role as a Honda supplier. But he emphasized that Honda had not made a final decision.

Mr. Iwamura, at a news conference for the announcement of Honda's quarterly earnings, said, "Generally speaking, we consider the size of our dealings in the medium to long term when we hold shares" in other companies.

Takata continues to supply Honda with other safety equipment, including seatbelts. …

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