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Takata Agrees to Plead Guilty & Pay $1 Billion as Massive Recall Expands

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Takata to Pay $1 Billion as Massive Recall Continues to Expand

The largest automotive recall in U.S. history continues to grow as regulators say more than 20 million dangerous Takata airbag inflators remain on American roads.  It is now estimated that 42 million vehicles, equipped with around 70 million defective Takata inflators, will be recalled in the U.S alone. In an agreement with the Department of Justice (DoJ), Takata Corporation, a Japanese airbag and seatbelt manufacturer, has agreed to plead guilty to criminal charges for fabricating documents to hide the fact that millions of their inflators could turn into lethal threats, and for committing wire fraud.

“They falsified and manipulated data, because they wanted to make profits on their airbags, knowing they were creating risk for the end-users,” said Barbara L. McQuade the U.S. district attorney.

Three Takata executives have been named by the DoJ in connection to the illegal activity going back 17 years; Shinichi Tanaka, Hideo Nakajima, and Tsuneo Chikaraishi. In a released 2015 email Nakajima, a former research director, wrote “they had no choice but to manipulate the test data.” All three are believed to be in Japan, but they could be extradited to face their alleged crimes in the U.S. despite their protection as Japanese citizens because of a precedent. Three of the company’s former employees were sent to the U.S. in 2013 to face charges over a seatbelt price-fixing scheme.

“Corporations and individuals who cheat will be held accountable,” said McQuade. “Cheaters will not be allowed to gain an advantage over those who play by the rules.”


Automotive Executives Say $1 Billion May Be Too Low


In addition to the charges, Takata has agreed to a $1 billion financial settlement with the U.S. government, affected owners, and the automakers, who have been paying for the ongoing recall. The financial details are pending the review of a judge, who will make sure that $1 billion is sufficient. Some executives in the automotive industry say that the number is nowhere close to where it needs to be. Others are worried that Takata will not be able to afford the payments in addition to the costs of the parts needed for the recall, now linked to 11 deaths and more than 180 injuries in the U.S. (and at least five more deaths internationally).

“Reaching this agreement is a major step towards resolving the air bag issue and a key milestone in the ongoing process to secure investment,” said Shigehisa Takada, the CEO of Takata, almost one year after offering to resign from his position. “Takata deeply regrets the circumstances that have led to this situation and remains fully committed to being part of the solution.”

U.S. officials stated that a $25 million criminal fine must be paid within a month, but the $850 million allocated to the automakers, and $125 million promised to the consumers who sustained injuries, or the relatives of individuals who died, are not due until Takata sells and the payments can be afforded. In addition, several personal lawsuits have been settled out of court with victims and more are believed to be pending.

This is not the first settlement between Takata and U.S. authorities over their faulty inflators. In 2015, Takata paid $70 million to regulators because they allegedly knew about the hazardous inflator defect long before informing authorities. Takata admitted to the National Highway Traffic Safety Administration (NHTSA) that they provided “selective, incomplete or inaccurate data.” Takata may also owe an additional $130 million for deferred penalties brought by the NHTSA.


Takata Recalls Continue – 2.1 Million Vehicles Added


Takata executives have seen U.S. recalls expand in the past two weeks; Ford, Honda and Toyota have all recalled more vehicles, collectively an additional 2.1 million. Of the 19 affected automakers around the globe, Honda has been hit the hardest. The vast majority of deaths and injuries have been sustained in a Honda and the NHTSA warned in June that more than 300,000 extremely unsafe Honda’s were still on the road. Of the most dangerous are Honda’s 2001 to 2003 Civic, Accord, CR-V, Odyssey, Pilot, and 2002 to 2003 Acura TL and CL vehicles.

This week, after news that courts may become involved in a mediated buyout or bankruptcy, Takata’s shares dropped more than 17 percent in one day after the company rebounded 150 percent in the past two months. Takata is in the middle of trying to sell the majority stake in their company, but with the ongoing recalls the new owner may be liable to cover billions in recall expenses. For that reason, potential buyers have been reportedly pushing for a court mediated turnaround or bankruptcy against the wishes of Takata, because the price will be lowered and they can limit the risks related to the recall.

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