Takata Racks Up $400M in Losses While Prosecutors Consider Criminal Charges for Air Bag Explosions

Takata Racks Up $400M in Losses While Prosecutors Consider Criminal Charges for Air Bag Explosions

Fourteen deaths, over 100 injuries, and millions of dollars in fines later — and, disturbingly, it’s likely that we still haven't heard the end of it from Takata Corporation. The Japanese auto parts supplier is already facing a huge backlash for fitting millions of cars across the globe with defective air bag inflators. But information recently surfaced that Takata Corp. failed to report a crucial incident back in 2003 that is heavily linked to the recent recall of these vehicles.

Last November, the National Highway Traffic Safety Administration (NHTSA) fined Takata $70 Million for concealing its worldwide distribution of defective air bags. NHTSA also required an internal report from Takata as part of this settlement. According to this report, an air bag rupture occurred in Switzerland as early as May 2003, but U.S. safety regulators were not informed. Instead, Takata attempted to address the problem by making production changes, despite the legal implications of failing to report safety issues within 5 days.

Yet, this is only the latest of revelations concerning defaults in Takata’s air bags, and discrepancies in the company’s reporting may now lead to criminal liability.

Takata’s Dubious History

The series of reports released by NHTSA detailed incidents involving faulty air bags and manipulated testing going back several years. Takata fitted millions of cars with air bags filled with an ammonium nitrate propellant, which can explode with excessive force when exposed to too much heat and moisture. This results in an outburst of metal shrapnel, and has caused numerous severe accidents. These air bag inflators were first produced in 2000.

“Takata has focused extensive resources on researching and testing of airbag inflators, including working with independent, world class, technical experts to identify the causes of the inflator failures,” said Takata spokesperson Jared Levy in an emailed statement. “We extend our sincerest apologies to those who have been affected by the inflator failures.”

Yet only last year did Takata, which supplies parts to manufacturers such as Honda, Chrysler, and Nissan, begin a global recall of defective air bags. And after expanding the recall to include even more air bag inflators this year, totaling 100 million worldwide and nearly 70 million in the U.S., it has become the largest auto recall in U.S. history. The NHTSA found that of 245,000 inflators recalled and tested so far, 660 ruptured.

A Criminal Wrongdoing

As the latest recall unfolds, it’s not looking good for the auto parts manufacturer. Takata is now assessing buyers to try to resolve its mounting financial chaos, and the CEO Shigehisa Takada plans to resign. But as well as crippling fines – and not to mention a loss of shares and customers – Takata could even face criminal liability.

Last year, Congress made failing to alert federal regulators about safety defects a crime punishable by not only uncapped fines but up to 5 years in prison. Democratic senators reasoned that fines alone will do nothing to solve the snowballing number of injuries and deaths caused by irresponsible automakers.

Because of this new bill, Takata is under investigation by the U.S. Justice Department. And currently, federal prosecutors are in negotiations with Takata after finding evidence of criminal activity – that is, misleading statements and covered up information about its faulty air bags. In the past, Takata has been found to have produced “selective, incomplete or inaccurate data” pertaining to air bag testing. It seems that a criminal case is now emerging from these misleading reports.

Prosecutors may pursue criminal charges such as wire fraud, among others, though it’s not yet clear whether Takata will be offered deferred prosecution agreements. Either way, Takata appears to be heading for collapse.

The auto parts company remains under investigation by the U.S. Justice Department, and air bag inflators are scheduled for replacement through 2019. Takata has lost over $400 Million to recalls in the last 2 years, and this number is expected to climb to more than $6 billion.

With so many recall notices pending, these air bag inflators still pose a huge risk to drivers. Automakers continue to urge their customers to check if their vehicles are under recall.

Sokolove Law Team

Contributing Authors

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Last modified: December 28, 2016