US air bag probe: Takata to pay $1 bn, plead guilty

$25 million will be given to US and $975 million to compensate carmakers and people who were injured

Takata admitted to hiding the deadly risks of its exploding air bags for about 15 years in an agreement to pay US regulators, consumers and car manufacturers $1 billion in penalties. The faulty air bags have been linked to at least 17 deaths worldwide.

 

The Tokyo-based manufacturer also agreed to plead guilty to one criminal charge. The settlement requires approval of a US judge.

 

Formerly, the second largest supplier of air bags in the world, Takata has had difficulty coping with the biggest product recall in history, which is expected to cover more than 100 million air bags. Putting the criminal investigation behind it should help the struggling car parts maker find a buyer. A sale may be announced by March after due diligence had to be extended in part because of the difficulty in calculating the potential liabilities, people with knowledge of the talks said last month.

 

The $1 billion payment includes $25 million to the US and $975 million to compensate carmakers and people who were injured, according to court papers made public. While the criminal fine is due within a month, the company doesn’t have to pay the restitution until it’s sold because it can’t afford to pay now.

 

Separately, US prosecutors charged three former Takata executives for their alleged roles in hiding the risks since 2000. The three — Hideo Nakajima, Tsuneo Chikaraishi and Shinichi Tanaka — are Japanese citizens and aren’t in US custody. The US has an extradition agreement with Japan, but it’s not automatic.

 

The three men charged worked at Takata until about 2015, according to court papers. None of them, or their lawyers, could be reached for comment.

 

According to prosecutors, the three knew the inflators had ruptured and other failures during testing, and routinely discussed fabricating test results, removing unfavourable information —known as “XX-ing” the data — and manipulating reports. They hid the defects and issued flawed reports so that carmakers would buy the air bags, enriching themselves and the company, prosecutors said.

 

“Automotive suppliers who sell products that are supposed to protect consumers from injury or death must put safety ahead of profits,” US Attorney Barbara McQuade in Detroit said on Friday. “If they choose instead to engage in fraud, we will hold accountable the individuals and business entities who are responsible.”

 

The investigation hasn’t concluded and other people may be charged, McQuade said.

 

The settlement is a key milestone in an ongoing process to secure investments in Takata, Shigehisa Takada, chairman and chief executive officer, said in a statement.