American Honda Motor Co. plans to offset the financial hit that dealers are taking from the recall of millions of vehicles with potentially defective Takata airbag modules.
Beginning this month, the automaker will compensate Honda and Acura dealers for depreciation costs for vehicles that cannot be sold because of the airbag recall, according to a company notice sent to dealers this month and obtained by Automotive News.
The company says it also will provide financial assistance to defray floorplanning costs incurred from the temporary suspension of vehicle sales at Honda and Acura dealers.
Honda informed dealers that the reimbursement plan will go into effect the week of March 28. But it has not finalized the claim process, according to the notice.
Multiple automakers are sorting through a safety recall of more than 29 million potentially faulty airbag inflators built by Takata.
In January, American Honda ordered a stop-sale on 1.7 million new and used cars and light trucks, including the popular CR-V crossover, from model years 2007-2015.
Used vehicle sales are typically a key profit center for dealerships -- especially when new-car inventories are reduced.
The sweeping recall also affects lease vehicles. A customer whose lease is ending may turn a vehicle in to the dealership, or even extend the lease. But if the vehicle is under the recall notice, the customer cannot opt to buy it at the end of the lease if the repair part is not available.
Complicating the situation, the industry has limited capacity to manufacture replacement airbags that will allow dealers to resume sales.
In the notice to dealers last week, Honda said that replacement components will not arrive before this summer.
American Honda spokesman Chris Martin said the dealer assistance program is scheduled to end on July 29.
No estimates
He said the company is not able to estimate the value of the network-wide assistance because it will depend on how long unsold vehicles are in dealers’ hands before they can be repaired and delivered.
“American Honda has taken steps to assist U.S. dealers with some of the implications of the most recent Takata airbag inflator recall, for which replacement parts may be delayed until this summer,” Martin said in an emailed statement.
“This effort includes a Trade-In-Assistance program that will benefit both the dealers and, ultimately, owners of affected vehicles seeking to trade in their vehicles through one of our dealers, since the dealers are not able to sell such vehicles until the recall repair is completed."
The widespread Takata recalls stem from concern that airbag inflators in affected models could malfunction, deploy prematurely and spray shrapnel, resulting in passenger injury. According to the National Highway Traffic Safety Administration, 10 deaths have been linked to the defect.
Honda Motor Co. owns about 1.2 percent of Takata's outstanding shares, and the automaker has used Takata as a supplier of airbags for years.
Regulations
Federal law requires that if a new vehicle is under a recall notice, it must be repaired before it can be delivered to a consumer. But the law does not cover used vehicles.
The law does allow manufacturers to direct dealers to stop selling used vehicles that are under recall.
Martin says it has been the company’s longstanding policy to require dealers to also repair used vehicles before they can be sold.
