Bullish on Bags--Last year they were demonized; now they're more popularthan ever

Despite their danger to a small percentage of drivers and passengers, air bags are popping up everywhere on new vehicles worldwide: in door panels, knee bolsters, seats, windows and sometimes the back seats. Even more exotic applications are being proposed, including inflatable seatbelts, headrests with air bags that protect against whiplash, air bags that protect the feet, and even bumpers with air bags designed to limit damage to other vehicles in collisions.

The skyrocketing popularity of side air bags - which are not mandated in the U.S. by federal regulations - is driving most of the growth in North America. Even lower-cost models such as Toyota's Corolla, Chevy's Prizm and Volkswagen's New Beetle already feature them.

New, more elaborate inflatable safety systems designed to provide head protection for drivers and passengers in side impacts - in addition to regular side bags - are sprouting rapidly on luxury cars. BMW AG introduced a special head protection system as standard equipment in its 1998 5 and 7 series models. Now other automakers are following suit, including Mercedes-Benz AG, Toyota Motor Corp. and Volvo Car Corp. An upscale car now can easily have six or more inflatable restraints of some kind.

The BMW system uses an airtight tube that drops from the headliner and inflates in milliseconds to provide head and neck protection plus the torso-protecting side bag. Mercedes, Toyota and Volvo use inflatable "curtains" for the same purpose.

Tier One LC, an automotive electronics research company headquartered in Mountain View, CA, predicts the world air bag market will nearly double from more than 106 million air bags produced in 1998 to nearly 200 million by 2005.

This may be a bit of a surprise to observers who have watched safety activists and the general news media demonize air bags. They have been branded as killers of young children, old people and short women. At the height of air bag hysteria last year, about 60 people had been killed during 900,000 deployments, almost all of them children or adults who were not wearing seatbelts or who were improperly secured in child safety seats.

Since then, U.S. consumers have been allowed to legally have air bag deactivation switches installed in their cars. In Europe, stiff laws prohibiting small children from sitting in the front seat were enacted. Some automakers responded by lowering air bag deployment speeds and supporting educational campaigns to keep baby seats and young children out of front seats while encouraging everyone to buckle up.

The National Highway Traffic Safety Administration (NHTSA) reports that despite these efforts, people still are being killed by air bags, with the death toll now at 105. However, air bags are credited with saving many more lives: 3,148 to date.

NHTSA says it has processed about 30,000 requests from consumers seeking cutoff switches for vehicle air bags since last fall, a small number considering there are an estimated 75 million cars and trucks on the road today equipped with air bags.

Federal law requires that all new vehicles be equipped with dual front driver/passenger air bags in 1998, but the law doesn't require side bags, only steel side-door beams to protect occupants in a crash.

Side bags usually provide additional protection to the body in broadside collisions, which account for 21% of all motor vehicle accidents and 36% of all fatalities. The growing number of light trucks on the road further raises the risk of injuries in car-truck side impacts. However, recent government tests that crashed a Ford Explorer into the side of a Honda Accord suggest the danger is not as high as some critics claim.

Even so, publicity surrounding the car-truck compatibility issue has raised public awareness and concern over side impact crashes and prompted a spitting match among many automakers as to which one is a "leader" in side air bag installation.

Better side-impact protection for cars is seen by many as the easiest short-term answer to the car-truck compatibility issue.

At the New York Auto Show last April, Ford Motor Co. President Jacques Nasser said his company will offer side air bags on all of its cars sold in North America and its Windstar minivans within the next three years. Side air bags are available on the '99 Mercury Cougar and will be standard equipment on the 2000 Lincoln LS6 and LS8.

Mr. Nasser also told The New York Times editorial board in April that these moves will enable Ford to achieve "leadership in safety in the U.S."

That prompted indignant responses from automakers as diverse as General Motors Corp. and Nissan Motor Corp. U.S.A. They said they already were well ahead of Ford in the side bag race. GM, for instance, currently offers side bags on six vehicles sold in the U.S.

GM also brags that it installed its first side air bags on the 1997 Cadillac DeVille and will have 500,000 side-bag equipped vehicles on the road by the end of the '98 model year. It says 21 of its models will be equipped with side air bags in two years.

GM models currently equipped with side bags include the DeVille and Seville, Chevrolet Prizm and its trio of front-drive minivans: Chevy Venture, Oldsmobile Silhouette and Pontiac TransSport.

Douglas Campbell, vice president of engineering for inflatable restraint systems at TRW Inc. says the recent publicity on side-impact crashes hasn't stirred up more orders for side bags - but proclamations such as Ford's Mr. Nasser's at the New York Auto Show have caused some hesitant automakers to get off the fence and reconsider adding side bags on more vehicles.

Mr. Campbell won't name names, but one company is Chrysler Corp., which currently doesn't offer side air bags. It now says it will, beginning around 2001. Chrysler's new relationship with Mercedes' parent Daimler-Benz AG is expected to give it ready access to side bag suppliers and technology.

Unfortunately, this boom is unlikely to translate into big profits for air bag suppliers such as TRW, Autoliv, Takata Corp. and Breed Technologies Inc. Morris Kindig, president of the research company Tier One, says competition and pricing pressure from automaker customers will keep margins razor thin. Like most major automotive suppliers, "everyone is really struggling for profitability," he says.

A shakeout is possible in the industry, Mr. Kindig adds, but air bag component suppliers further down the food chain are under even more pressure than the big integrators. Some may not survive, he predicts.