Takata to pay $1 billion for airbag scandal involving fatal inflators

Company - Mohit Shah - Feb 28,2017

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takata to pay dollar 1 billion for airbag scandal involving fatal inflators

Clearing the path for a possible sale, merger or restructuring, Takata settles the lawsuit that caused 16 deaths and affected 100 million air bag inflators worldwide

Takata, a Japanese auto parts maker pleaded guilty in a U.S. federal court in Detroit to a felony and have to pay a $1 billion fine for hiding information about the fatal risks of its exploding air bags.

Takata is required to pay $850 million to compensate automakers for recalls, $125 million for individual physical injuries, $25 million as a criminal penalty.

Takata Corp has now removed the major obstacle to its potential sale, merger or restructuring, which Takata needs in order to continue operations and complete the recalls. Earlier there were rumors that Takata might file for bankruptcy.

U.S. District Court Judge George Steeh said that he considered a stiffer penalty up to $1.5 billion, but that could make Takata bankrupt and delay the process of replacement of millions of potentially fatal inflators.

Some lawsuits also claimed that some automakers in the US knowingly bought the faulty bags from Takata in order to save money.

The deadly defect has resulted in the recall of 31 million cars worldwide from several automakers since 2008, In the U.S., 19 automakers are replacing the inflators. This is the country’s biggest automotive recall, affecting nearly 70 million inflators in 42 million cars.

Takata's defective airbag is responsible for about 16 deaths across the globe and more than 180 injuries.

Takata's inflators used ammonium nitrate that deteriorated overtime when exposed to high temperatures and humidity and can even burst to blow apart the canister.

Takata's fine is smaller when compared to the one imposed on Volkswagen, which required to pay up to $21 billion and also buy back cars in the diesel-gate scandal. Toyota and GM also paid huge penalties to settle charges filed against them.