Late last month, Takata filed for bankruptcy protection in the US and Japan, following “the largest and most complex safety recall in U.S. history,” according to the National Highway Traffic Safety Association. The company manufactured and sold what turned out to be a potentially fatal airbag release mechanism, which to-date has caused at least 16 deaths world-wide and over 150 injuries.
The airbag inflators have been installed in tens of millions of vehicles throughout the globe and have been known to explode with great force causing shrapnel to be jettisoned toward passengers. The cause of the explosions has been attributed to the presence of ammonium nitrate, which can burn at incredibly fast rates when exposed to high temperatures and humidity.
The safety defect turned into a scandal when it came to light that the company failed to report the risks when they first became apparent. Now, after years of decline, Takata’s liabilities have reached a total of $9 billion, affecting all 12 subsidiaries, which will also have to file for bankruptcy as well.
The Chapter 11 bankruptcy sets the groundwork for a major sale. In order to save the industry from severe setbacks, the company’s CEO, Shigehisa Takada, will hand over Takata’s assets to Key Safety Systems (KSS), a Chinese-owned company located in Detroit. Takata will be sold for approximately $1.6 billion, $1 billion of which will go toward penalties incurred earlier this year after Takata pleaded guilty to wire fraud charges. Takata has already given $125 million to a victims’ fund and $25 million directly to the DOJ. And $850 million is still owed to auto manufacturers, as per the US agreement.
Statements from Takata and KSS
Takata had this to say with regard to the recent events: “We believe taking these actions in Japan and the U.S. is the best way to address the ongoing costs and liabilities of the airbag inflator issues with certainty and in an organised manner.” And at a news conference he expressed remorse for the hardship resulting from the company’s negligence. “On behalf of Takata, I apologize deeply from the bottom of my heart,” he said, bowing.
Jason Luo, who heads up KSS, expressed confidence in faltering company: “Although Takata has been impacted by the global airbag recall, the underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat belts and other safety products have not diminished.”
So far, over 100 million airbag inflators have been recalled, 64 million of which are in the US. In total, over 14 vehicle manufacturers and about 42 million automobiles have been affected by the recall in this country.
Scott Upham, CEO of Valient Market Research, told CNN that shareholders will probably not receive reimbursement for losses incurred by the defective product. He also suggested that the major automakers will need to pay for the expensive recall process, which could end up costing $5 billion. Car manufacturers have their work cut out for them, as 65 percent of affected vehicles in the US still contain faulty inflators and the process to replace those inflators could take another six years.
Air Bag Victims Unite
To ensure victims are justly represented in the Bankruptcy proceedings, a commission – composed of people negatively affected by the airbag inflators – was officially assembled earlier this month. Being a part of an official committee, members are entitled to a certain amount of money to determine whether automobile manufacturers can be held liable for damages.
As highlighted by the Duncan Firm in Arkansas, bankruptcy filings do not preclude compensation for victims. If you or a loved one has been injured by a faulty Takata airbag, don’t hesitate to call an attorney with experience in defective product cases.