The Japanese airbag manufacturer Takata Corp. has agreed to plead guilty to the felony offense of wire fraud and will pay $1 billion in penalties. The hefty penalty reflects a multi-year collusion by executives to conceal a fatal defect in its air bag inflators.
Once the second-largest air bag supplier, Takata has since foundered after their products became the deadly crux of the biggest product recall in history. A recall covering over 100 million air bags in the last decade. Insiders expect the company will announce a sale in March following the fallout of the recent U.S. judgment.
The $1 billion plea deal includes a $25 million criminal fine paid to the U.S. government, $125 million to individuals injured and/or killed by the air bags, and $850 million to those automakers who purchased the faulty inflators. All payments are due within five days of Takata’s anticipated big sale or merger this spring.
Top Executives Also Facing Charges
While most expected the fine and felony charge against the company itself, federal prosecutors shocked industry leaders everywhere by also bringing criminal charges against three top Takata executives. Tsuneo Chikaraishi, Hideo Nakajima, and Shinichi Tanaka, all of Japan, face six counts of conspiracy and wire fraud charges.
According to the indictment against them, this trio knew about the defects as early as 2000 yet conspired to hide the known issues from buyers. They falsified and, in some cases, hid test results that showed the inflators’ tendency to rupture or otherwise fail the industry specifications and standards. The result was the market release of millions of airbags that risked violent rupturing during deployment. Thus far, there have been 11 deaths and over 180 serious injuries and the United States linked to Takata’s inflators.
“They have falsified and manipulated data because they wanted to make profits on their airbags, knowing they were creating risk for end-users, who are soccer moms like me,” Barbara L. McQuade, United States attorney for the Eastern District of Michigan stated at a Detroit news conference.
“The risk they allowed is really reprehensive,” she continued. “We want auto suppliers to know they have to put safety ahead of profits. Cheaters will not be allowed to gain a competitive advantage.”
Interestingly, while prosecutors shine their light on Takata Corp. and Takata executives, it appears automakers may escape charges related to their own responsibility in the crisis. In fact, they are getting paid for it via this guilty plea deal. As the New York Times investigated last year and as per our reporting of it, Takata airbag competitor Autoliv extensively studied and tested the Takata design back in the late 1990s. At that time, they immediately discovered and recognized the dangerous risks and alerted automakers of those dangers. Automakers ignored the warning.