Takata Airbag Settlement With DOJ May Cost $1B: Report

Takata Corp. is considering a settlement with the Department of Justice, which may end up costing the airbag manufacturer up to $1 billion to resolve criminal charges linked to its recall of millions of defective, potentially explosive, airbag inflators, which have caused serious injuries and deaths. 

According to the Wall Street Journal, sources close to the negotiations indicate that a Takata airbag settlement between the Japanese parts manufacturer and the U.S. government could come as early as January. It would involve hundreds of millions of dollars, maybe as much as a billion, with some paid up front and the rest paid in installments over a course of several years.

The potential deal comes as Takata and other parts suppliers struggle to repair tens of millions of defective airbag inflators that have been recalled over the last two years.

The recalled airbag inflators have been found to unexpectedly explode under certain conditions, such as high humidity, causing the airbag to over-inflate and send shrapnel flying into the passenger compartment of the vehicle. An investigation by the National Highway Transportation Safety Administration (NHTSA) has suggested that ammonium nitrate based propellants used in the inflators may cause the airbag explosions and that the chemical may not be safe for inflator designs.

Since the investigation was launched and the first Takata airbag recalls were issued in June 2014, a mere 12.5 million inflators have been replaced of the 46 million potentially defective inflators that may still be installed in an estimated 29 million vehicles throughout the United States.

As the recall programs commenced in late 2014, both Takata and the impacted auto makers fell far behind in planning and coordinating recall repairs, as the number of impacted vehicles grew by the millions nearly every month.

The rupturing Takata airbag inflator recalls are the largest and most complex recall to ever hit the auto industry. The NHTSA indicated in early December that the number of vehicles set to be recalled over the next three years could reach between 64 and 69 million, following scientific based studies to determine whether the non-desiccated phase-stabilized ammonium nitrate (PSAN) used in Takata airbag inflators are safe.

Takata could face charges of wire fraud for putting out false and misleading information about the airbags, which have been linked to 11 deaths and at least 184 injuries in the U.S. alone. Any settlement reached with the Justice Department over the federal charges would not resolve civil airbag recall lawsuits filed by consumers who were injured or lost loved ones to the exploding airbags.

Takata is currently in a settlement agreement with the NHTSA, following a November 2015 consent order. The agreement requires Takata to cooperate with the agency in all future actions involving the recall investigation, and demands that the NHTSA be head controller of the recall campaigns in the U.S., granting the agency exclusive control in organizing and prioritizing the recall process to speed up the repairs. In addition, the NHTSA fined Takata $200 million.

Nearly every major automaker has been impacted by the recalls, including Honda, General Motors, Ford, BMW, Mercedes Benz, Volkswagen, Nissan, Mitsubishi, Chrysler (FCA), Mazda, Toyota, and various others.

Under the consent order, the NHTSA ordered Takata to stop manufacturing phase-stabilized ammonium nitrate propellant inflators that investigators believe are the root cause of the problems. Investigators from the agency have insisted the inflators ammonium nitrate based propellants are unstable when exposed to high humidity causing them to rupture either spontaneously or when needed in automobile crashes.

The ammonium nitrate based inflators have been found to pose explosion risks under certain conditions, unlike normal inflators. Investigations by the NHTSA have identified the inflators are more susceptible to explode in more humid climates, mainly southern regions of the U.S. that are closer to the equator. The NHTSA has specifically stated that the ammonium nitrate based propellants may not be suitable for inflator designs due to the unknown effects of climate impact.