Takata to pay $1 billion fine, admit wrongdoing in proposed settlement

January 13, 2017

This is turning out to be a big week for automotive scandals.

On Wednesday, the 16-month-long Dieselgate saga came to an end--or at least the end of its current chapter--when Volkswagen agreed to shell out $4.3 billion in fines to the U.S. More shocking, Volkswagen agreed to formally admit wrongdoing, which could put a serious crimp in the automaker's plans to defend itself in lawsuits filed by consumers and dozens of state attorneys general. Shortly thereafter, six Volkswagen executives were indicted on charges of conspiring to commit fraud and violating the U.S. Clean Air Act.

Now, it's Takata's turn: insiders report that the Japanese supplier of fatally flawed airbags, which have killed at least 16 people and injured more than 100 others, is preparing a settlement of its own. And yes, it'll be a doozie.

Official details of the settlement could come today, but unofficial reports lay out the key elements:

1. A payout of $1 billion, to be divvied out as follows:

  • $25 million to the federal government in criminal fines
  • $125 million to compensate victims and families of victims affected by Takata's exploding airbags
  • $850 million to compensate automakers struggling to handle the largest safety recall in U.S. history, which affects 70 million airbag inflators in 42 million vehicles 

2. A formal admission of guilt, either to charges of wire fraud (details forthcoming), charges of lying to automakers and to the National Highway Traffic Safety Administration, or potentially both.

3. An independent monitor for the company, similar to the one Volkswagen agreed to bring on, who will ensure that Takata complies with all relevant laws and regulations 

While items #2 and #3 will be fairly easy for Takata to carry out, the company probably won't be able to pony up that $1 billion right away. If Takata finally manages to finds a buyer, the new owner might bring that cash to the table.

However, many prospective buyers have insisted that they're not planning to sign on the dotted line unless Takata files for bankruptcy first. (That's probably to protect the buyer from Takata's previous misdeeds, though it's worth noting that the same strategy hasn't exactly worked for General Motors.) Whether Takata is willing to do so will likely have a direct effect on how quickly it's purchased.

Long time coming

While today's settlement news is a very big deal, it isn't very surprising. 

In November of 2015, the National Highway Traffic Safety Administration slapped Takata with a $200 million fine. Of that sum, $70 million was payable immediately and $130 million was held in abeyance, only to be assessed if the company failed to meet certain benchmarks set by NHTSA.

In conjunction with that fine, Takata agreed to stop manufacturing inflators with ammonium nitrate, the dangerous compound that has caused those inflators to explode upon deployment. Technically, that wasn't an admission of guilt, and Takata has consistently held that ammonium nitrate is perfectly safe despite overwhelming evidence to the contrary. However, to most observers, it seemed like only a matter of time before Takata was forced to admit that its products were deeply flawed.

Then, in July of 2016, an audit issued by Takata's former top client, Honda, revealed that the company had willfully manipulated test results to give the impression that its airbags were safer than they actually were.

Last month, word of a looming $1 billion settlement with the U.S. government began making the rounds. Though such reports all came from insiders who weren't at liberty to speak publicly about settlement details, it appears now that they may have been correct.

We'll be sure to update this post when the official settlement is revealed.

[Update] A U.S. federal grand jury indicted three former, long-time Takata executives today on charges of wire fraud and conspiracy for their part in the embattled supplier's airbag inflator recall. The indictment alleges that execs Shinichi Tanaka, Hideo Nakajima, and Tsuneo Chikaraishi knew the faulty inflators were failing tests as early as 2000, Automotive News reports.

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