Takata pleads guilty in air bag scandal, agrees to pay $1B

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Monday, February 27, 2017
Takata airbag scandal
Takata pleads guilty to fraud in defective airbag scandal.

DETROIT, MI (KTRK) -- Japanese auto parts maker Takata Corp. pleaded guilty to fraud Monday and agreed to pay a $1 billion penalty for concealing a deadly defect in millions of its air bags.

Takata admitted hiding evidence that its air bag inflators can explode with too much force, hurling shrapnel into drivers and passengers.

The inflators are blamed for at least 16 deaths worldwide - 11 of them in the U.S. - and more than 180 injuries. The problem touched off the biggest recall in U.S. automotive history, involving 42 million vehicles and up to 69 million inflators.

The company's chief financial officer, Yoichiro Nomura, entered the guilty plea on Takata's behalf in federal court in Detroit. He also agreed that Takata will be sold or merge with another company.

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The penalties include $850 million in restitution to automakers, $125 million for victims and families and a $25 million criminal fine.

Separately, three former executives are charged with falsifying test reports. They remain in Japan.

Takata's inflators use ammonium nitrate to create a small explosion that inflates air bags in a crash. But when exposed to prolonged high temperatures and humidity, the chemical can deteriorate and burn too fast. That can blow apart a metal canister.

In the U.S., 19 automakers are recalling the inflators. Worldwide, the total number of inflators being recalled is over 100 million.

Plaintiffs in dozens of lawsuits against Takata and five automakers allege the car companies knew the products were dangerous yet continued to use them for years to save money.

Takata, which also makes seatbelts, has racked up two straight years of losses over the recalls but said it hopes to start turning a profit again this fiscal year.

Takata's penalty is small compared with the one imposed on Volkswagen, which must buy back cars and pay up to $21 billion in penalties and compensation to owners over its emissions-cheating scandal.

Karl Brauer, executive publisher of Kelley Blue Book, said authorities may have kept the penalty manageable so Takata could stay in business and continue to carry out the giant recall.

"My sense is there has been more kid-gloves treatment of Tataka simply because destroying them makes the problem much worse," Brauer said.