In the annals of corporate misconduct, few schemes can compare in sheer magnitude to the one that led to the downfall of the Japanese auto parts supplier Takata. Over more than a decade, the company sold a dangerously defective product to auto makers around the world. And when reports of the problem began to surface, Takata executives engaged in a lengthy cover-up, despite increasing reports of injuries and deaths linked to malfunctioning Takata airbags.
The Takata recall involves more than 70 million airbags in 42 million vehicles, with more models being periodically added to the list—including, just last month, millions of additional cars manufactured by Honda, Toyota, Audi, BMW, Ford, General Motors, Tesla, Nissan, Mitsubishi, Subaru, Fiat Chrysler, Mazda, Mercedes-Benz, and Jaguar-Land Rover in model years 2009, 2010, and 2013. The National Highway Traffic Safety Administration has called the Takata recall “one of the largest and most complex recalls in U.S. history.” The recall began on a limited basis in 2008 and is expected to continue through at least the end of this year.
The defect in the airbags has to do with the chemical propellant used to help the airbags inflate upon the impact of a crash. In a cost-saving move, Takata used an ammonium nitrate compound that proved to be unstable, particularly when subject to humidity, heat, and age. The degrading of the propellant over time can cause the inflator cartridge to become pressurized and explode during an airbag deployment, sending shrapnel flying in the direction of front-seat occupants.
The airbags were installed in millions of vehicles between 2002 and 2013. According to a federal grand jury indictment, several high-level Takata executives manipulated and suppressed testing data in order to represent to auto makers that the rupture-prone inflators met safety standards. “The test information and data was materially false, fraudulent, and misleading,” federal prosecutors alleged in the indictment.
At one point, the indictment continues, a senior Takata executive “directed a junior engineer to remove test rupture data” from one report provided to an auto maker. Months later, another executive was notified that the altered report provided to the auto maker “has incorrect data, data that cannot be validated, data that was incorrectly labeled, or data that does not exist.” But in internal emails that executive maintained that the company had no choice but to fake the data, that the group needed to “cross the bridge together.”
Takata reportedly began to receive reports of malfunctions in the field as early as 2004, but the first recall wasn’t issued until 2008, focusing on merely 4000 cars. As the reports of injuries mounted, the problem ultimately drew the attention of federal regulators. Early last year Takata agreed to plead guilty to wire fraud and pay $1 billion to settle a criminal case brought by the U.S. Department of Justice. The total includes a $25 million fine and a $125 million fund to compensate those injured by the airbags; the remainder is earmarked to cover the costs of the recall and reimbursement of auto manufacturers defrauded by the company. In addition, three Takata executives were indicted on conspiracy and wire fraud charges.
Last summer Takata announced that it was filing for Chapter 11 bankruptcy protection in the United States and selling much of its remaining operations to a Chinese-owned company. The company is facing numerous civil suits and state claims as well. And, as the expanding recall demonstrates, the threat posed by the defective airbags is still being addressed.
The recall is proceeding in stages, with priority given to older models that have had the deteriorating propellant the longest. Some observers don’t expect the recall to be complete until 2020, and at least one auto maker has included in the recall notice language advising car owners not to allow riders in the front passenger seat until the airbag inflators are replaced. Disputes have also arisen over whether the replacement airbags are sufficiently different from the originals or will also be subject to recall. A 2016 report by the U.S. Senate Committee on Commerce, Science and Transportation found that airbag recall completion rates were “unacceptably low,” and that several auto makers were still selling cars with suspect inflators that would have to be recalled.
“The Takata airbag crisis is an unprecedented safety recall of airbags – safety devices that are supposed to save lives, not injure or even cause death,” the report observes. “As an initial matter, the sale of new vehicles containing Takata non-desiccated ammonium-nitrate inflators should be stopped until these vehicles are repaired. NHTSA, Takata, and the automakers should also take urgent coordinated action to increase the supply of non-ammonium-nitrate replacement inflators. Finally, NHTSA, Takata, and the automakers must continue to keep consumers fully informed of what vehicles are subject to the recalls and when replacement parts will be available, and take all possible action to ensure that impacted vehicles are repaired as soon as possible.”
Hundreds of injuries and 21 deaths have been attributed to the faulty airbags. The latest fatality occurred just a few weeks ago in Florida. According to news reports, a 34-year-old woman, driving her mother and children in a 2002 Honda, collided with a Trans Am that was making an illegal left turn; the driver airbag deployed and the inflator casing exploded, inflicting severe head injuries on the victim. Authorities have indicated that the accident appears to have been survivable if the airbag had been working properly.
The Takata scandal has shaken consumer confidence in airbag safety and raised uncomfortable questions about the vigilance of government agencies that regulate the auto industry. But it’s also a wake-up call to check with your dealer regarding any outstanding recall or safety issues with your own vehicles. The NHTSA has a special lookup tool on its website, SaferCar.gov, to help consumers discover if their vehicle is included in the Takata recall, as well as to search by VIN for other recall issues.
If you have suffered damages as a result of a defective product, drug, or medical device, unfair business practices, data breaches or corporate misconduct, the attorneys of Franklin D. Azar & Associates may be able to help. Call or contact us here today for a free, no-obligation consultation.
