Takata to Plead Guilty, Will Issue $1 Billion in Restitution for Deadly Airbags

Automotive parts supplier Takata Corp, along with three of its former employees, were charged by federal prosecutors with concealing the deadly defect of its airbag inflators.

The devices have been subject to an unprecedentedly massive recall and have have been linked to at least 11 fatalities in the United States. Takata has agreed to plead guilty to the charges against it and will pay $1 billion in restitution.

Of the billion dollar penalty, $850 million is set aside for automakers that purchased the inflators, while $125 million will go toward the individuals injured by the defective products. The remaining money will serve as a general criminal fine.

The federal grand jury also indicted former Takata employees. Filed in early December and unsealed today, the indictment alleges the three workers falsified and doctored reports to mask test results that would have shown that the inflators were dangerously faulty. The three men — Shinichi Tanaka, Hideo Nakajima and Tsuneo Chikaraishi — have been charged with six counts of conspiracy to commit wire fraud, and wire fraud.

“Automotive suppliers who sell products that are supposed to protect consumers from injury or death must put safety ahead of profits,” U.S. Attorney Barbara L. McQuade said in an official statement to the press. “If they choose instead to engage in fraud, we will hold accountable the individuals and business entities who are responsible.”

Takata’s airbags differ from others in that the inflators use an ammonium nitrate propellant to quickly fill the crash bags. However, the chemical can become unstable over time, expand too quickly, and blow apart the metal canister. Prosecutors said that the company was aware that its inflators were not performing to industry specifications as early as 2000, but sold them to automakers anyway. The parts supplier even encouraged customers to purchase systems by submitting fraudulent reports that concealed the failures and ruptures during testing, prosecutors said.

The U.S. has ordered Takata to recall all of its faulty air bags by the end of 2019. The matter is being conducted in a way that prioritizes higher-risk cars sold in states with elevated temperatures and humidity. Roughly 46 million airbags in over 29 million vehicles have been recalled since December 2016. Another 25 million additional units are set to be recalled over the next two years.

As for the criminal fine, payments to the individual victims will begin immediately. Money allocated to automakers must be paid within five days of Takata’s anticipated sale or merger — one of which is anticipated to occur within the year.

The company has also been fined $70 million by U.S. safety regulators for its slow handling of the recall. There could also be an additional $130 million fine leveled from the National Highway Traffic Safety Administration, but only if Takata can’t fulfill the terms of a consent order agreed to in November of 2015.

Considering the overwhelming costs involved with the recall and legal expenses, financial analysts fully expect Takata’s U.S. operations — located in the Auburn Hills, Michigan — to seek bankruptcy protection.

[Image: Takata]