Executive Briefings

States Reach a $650M Settlement Over Exploding Takata Air Bags

Virginia, Maryland and the District last week were among dozens of states to to reach a $650m settlement with the U.S subsidiary of a Japanese company that manufactured faulty air bags installed in millions of automobiles worldwide, bags that sprayed deadly shrapnel that killed at least 22 people and injured hundreds more.

The agreement was reached with TK Holdings, Inc., the American subsidiary of Takata as part of a settlement between 44 state governments and the District, requiring a $650m payout by the Japanese firm. Nearly 34 million of the 250 million vehicles on U.S. roads have been part of the largest recall in U.S. history.

Unlike most air-bag makers, Takata uses ammonium nitrate to trigger a small explosion that inflates the air bag when the vehicle strikes something. But in some vehicles — particularly those that were several years old and kept in regions of the country with high humidity — the ammonium nitrate burns too fast, causing the chemical’s container to explode and spray drivers and passengers with metal shrapnel.

“Companies have a moral and legal obligation to protect their customers from defective products like these incredibly dangerous airbags,” Virginia Attorney General Mark R. Herring said. “Just like the Volkswagen emissions scandal showed, we will move as quickly as possible to protect Virginians from defective or unsafe vehicles and will hold manufacturers accountable when they deceive drivers or place them at risk.”

Faced with the massive cost of worldwide recalls, Takata filed for bankruptcy in the U.S. and Japan last year. The company signed an agreement in November to sell most of its assets to a Chinese company for $1.58bn, promising to use the proceeds to compensate victims of the accident and repay debts.

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The agreement was reached with TK Holdings, Inc., the American subsidiary of Takata as part of a settlement between 44 state governments and the District, requiring a $650m payout by the Japanese firm. Nearly 34 million of the 250 million vehicles on U.S. roads have been part of the largest recall in U.S. history.

Unlike most air-bag makers, Takata uses ammonium nitrate to trigger a small explosion that inflates the air bag when the vehicle strikes something. But in some vehicles — particularly those that were several years old and kept in regions of the country with high humidity — the ammonium nitrate burns too fast, causing the chemical’s container to explode and spray drivers and passengers with metal shrapnel.

“Companies have a moral and legal obligation to protect their customers from defective products like these incredibly dangerous airbags,” Virginia Attorney General Mark R. Herring said. “Just like the Volkswagen emissions scandal showed, we will move as quickly as possible to protect Virginians from defective or unsafe vehicles and will hold manufacturers accountable when they deceive drivers or place them at risk.”

Faced with the massive cost of worldwide recalls, Takata filed for bankruptcy in the U.S. and Japan last year. The company signed an agreement in November to sell most of its assets to a Chinese company for $1.58bn, promising to use the proceeds to compensate victims of the accident and repay debts.

Read full article