Takata Corp. pled guilty to wire fraud in a Michigan federal court recently and agreed to pay $1 billion over its defective air bag inflators. This was over objections from drivers suing Takata and automakers who say that the car makers had also long known about the defect. The Japanese auto parts maker entered a guilty plea to one count of wire fraud before U.S. District Judge George Caram Steeh. This was part of the settlement with the U.S. Department of Justice (DOJ) that the company reached in January. The settlement requires Takata to pay nearly $1 billion for falsifying testing data and reports about its inflators and to repay anyone injured by them.
As we have previously reported on numerous occasions, the company’s air bag inflators have been linked to at least 11 deaths in the U.S. and caused the largest auto recall in the nation’s history. Takata has faced massive global recalls of its air bag inflator, which had a tendency to explode. The cheap but volatile ammonium nitrate that inflates the bags can misfire, especially in humid conditions, blasting chemicals and shrapnel at passengers and drivers.
Kevin Dean of the Motley Rice firm, one of the lawyers representing drivers in the multidistrict litigation (MDL) in Florida over the Takata airbags, appeared in the Detroit court to object to the plea agreement on grounds that it didn’t address the culpability of TK Holdings Inc., Takata’s U.S. subsidiary. He also contended that the DOJ had been misled in its investigation. The drivers in the civil litigation say that automakers Ford, Nissan, Honda, Toyota and BMW knew for years that the air bag inflators weren’t safe, but still kept equipping their cars with the “ticking time bombs” because they were cheaper than alternatives. Takata’s scheme started sometime around 2000 and ran for at least 15 years, with the company fraudulently persuading customers to buy air bag systems by giving them information that hid the accurate test results for the air bag inflators.
Judge Steeh said during the hearing that the plea agreement will not affect the liability of the car makers in the civil litigation, making it clear the settlement is not a shield. Honda’s internal documents and emails show that the automaker chose Takata inflators because they were relatively inexpensive. During testing in 1999 and 2000 at its own facilities, two of the inflators ruptured – and again in 2004, a decade before the national recall. As we have reported, other automakers chose Takata’s inflators. For example, Ford did so over the objections of its own inflator expert, who was opposed to the use of ammonium nitrate because it is sensitive to moisture.
Under the terms of the settlement, Takata also agreed to pay a $25 million criminal fine and to establish a $125 million restitution fund for people who were injured or will be injured by a malfunctioning Takata air bag inflator. The company also agreed to create an $850 million fund to benefit automakers who received the falsified data and reports or who purchased the potentially dangerous inflators. A little more than a year ago, NHTSA levied a $200 million fine on Takata – its largest ever – in a deal that saw the company admit that it failed to tell the agency about the defect despite knowing about it and withholding important information. At the time, NHTSA estimated that the exploding inflators had caused about 98 injuries.
The cases are United States of America v. Takata Corp. (case number 2:16-cr-20810) in the U.S. District Court for the Eastern District of Michigan, and In re: Takata Airbag Products Liability Litigation (case number 1:15-md-02599) in the U.S. District Court for the Southern District of Florida.