5 FAQs on the Takata bankruptcy and holding companies accountable
The recent bankruptcy filing by the airbag supplier Takata was hardly a surprise. For more than two years, the company has faced an array of huge problems stemming from defective airbags that have caused 16 deaths and more than 180 injuries.
A key question now, however, is how the bankruptcy will be handled. Will the Chapter 11 filing by TK Holdings (Takata’s U.S. business) favor major automakers over victims of the company’s defective airbags?
In this post, we will use a Q & A format to give you context on the Takata case and look ahead to possible next steps.
When did the problem of defective Takata airbags come to light?
Takata is a Japanese company that supplies airbags to major automakers throughout the world, including Toyota, General Motors, Mazda and BMW. As of 2015, about 1 in 4 vehicles on the road in the U.S. had Takata airbags.
In November 2014, the New York Times reported that Takata had been aware of dangerous defects for many years without disclosing the safety concerns to consumers or government regulators.
Eventually reports about deaths and injuries caused by exploding Takata airbags led to a massive worldwide recall of vehicles, with 66 million vehicles affected in the U.S. alone.
What is the defect that causes airbags made by Takata to be so dangerous?
The crux of the problem is the inflator in the airbags. This inflator is a metal cartridge that contains propellant wafers. This propellant can ignite in a crash, leading to a rupture that sends metal shards from the airbag spraying around the vehicle’s cabin – killing and injuring people.
Why is the Takata case such a scandal?
Because of the way Takata and possibly its carmaker customers knowingly put consumers at risk by using defective airbags.
In February 2017, Takata pleaded guilty to misleading carmakers about airbag defects. There have been allegations that the automakers installed the airbags despite knowing they were defective. It is unclear, however, what level of knowledge of the defects that the automakers had.
Is Takata putting aside any money as part of bankruptcy process to go to U.S. victims of defective air bags?
Yes, the company has set aside some money. It came in connection with a guilty plea in February 2017 to a felony charge of misleading regulators about the scope of the defective airbag problem.
The amount is $125 million. But that may not be enough to fully compensate victims, considering that around 100 lawsuits have already been filed against Takata in the U.S. The cases are for personal injury and wrongful death.
What are Takata’s obligations to automakers to reimburse them for the cost of the massive recalls that were necessary for defective airbags?
The $125 million that has been set aside for victims so far was part of larger $1 billion settlement that came with the felony guilty plea.
But lawyers for people injured by the defective airbag are already concerned that the victims of the defective airbags will not get proper compensation because so much money will go to automakers to use in replacing the defective airbags that are part of the massive recalls.