Takata to plead guilty, pay $1B penalty over airbag defects; 3 former executives indicted
WASHINGTON/DETROIT -- The U.S. government charged Takata Corp. with criminal wrongdoing on Friday in connection with airbag inflator ruptures linked to at least 16 deaths worldwide.
The company was charged with a single felony count of wire fraud. It has agreed to plead guilty to the charge as part of a $1 billion deal with the U.S. Justice Department to resolve a government probe into its handling of the airbag safety defect. The settlement remains subject to judicial approval.
U.S. Attorney Barbara McQuade from the Eastern District of Michigan announced the settlement and indictments on Friday in Detroit.
To see the plea agreement, click here.
"Automotive suppliers who sell products that are supposed to protect consumers from injury or death must put safety ahead of profits," McQuade said. "If they choose instead to engage in fraud, we will hold accountable the individuals and business entities who are responsible."
"Cheaters will not be allowed to gain an advantage over the good corporate citizens who play by the rules," McQuade said.
“For more than a decade, Takata repeatedly and systematically falsified critical test data related to the safety of its products, putting profits and production schedules ahead of safety,” said Andrew Weissmann, the Justice Department's fraud section chief. “This announcement is the latest in the automotive industry enforcement actions the Fraud Section has taken to protect U.S. consumers against fraud.”
A federal grand jury separately indicted three former Takata executives for fraud and conspiracy over the defective airbag inflators, which triggered the largest automotive safety recall in U.S. history.
Shinichi Tanaka, 59, Hideo Nakajima, 65, and Tsuneo Chikaraishi, 61 -- all of them Japanese citizens and longtime Takata executives who left the company in 2015 -- were indicted on wire fraud and conspiracy charges for allegedly convincing automakers while at the auto supplier to buy "faulty, inferior, non-performing, non-compliant or dangerous inflators through false reports."
The settlement could help Takata win financial backing from an investor to potentially restructure and pay for massive liabilities from the world's biggest automotive safety recall.
"Reaching this agreement is a major step towards resolving the airbag inflator issue and a key milestone in the ongoing process to secure investment in Takata," Takata CEO Shigehisa Takada said in a statement.
He added that the company "deeply regrets the circumstances that have led to this situation and remains fully committed to being part of the solution."
Warrants were issued for their arrest, but the defendants are presumed to be in Japan and do not currently have a date to appear in court. McQuade said the U.S. would work with Japan to seek extradition of the three executives.
"We would like them to stand trial in the U.S.," she said.
The six-count indictment, unsealed on Friday, says the three Takata executives knew around 2000 that the inflators were not performing to automaker's specifications and were failing during testing, but they provided false test reports to automakers. The indictment cited a 2004 email from Nakajima to Tanaka that says he was "manipulating" inflator test data.
The inflators can explode with excessive force, launching metal shrapnel at passengers in cars and trucks. Many of those killed were involved in low-speed crashes that they otherwise may have survived. To date, 11 deaths and least 184 people have been injured in the United States.
"These indictments send a strong message that if company executives knowingly put deadly products on the market, they will be held accountable for their actions," said U.S. Sen. Bill Nelson, D-Fla.
The settlement includes a $25 million criminal fine, $125 million in victim compensation and $850 million to compensate automakers who have suffered losses from massive recalls.
The company has 30 days to pay the $150 million for victim compensation and the criminal fine and then up to a year to pay the rest.
The Justice Department said it had recommended together with Takata that Ken Feinberg, a compensation expert, oversee the automaker and victim compensation funds.
The recalls have affected 19 automakers to date.
Regulators have said recalls would eventually affect about 42 million U.S. vehicles with nearly 70 million Takata airbag inflators, making it the largest U.S. safety ever.
Regulators expect it will take at least another three years to begin all of the recalls; just 12.5 million inflators have been repaired to date.
The settlement also calls for an independent monitor of the Japanese auto parts manufacturer. It could help Takata win financial backing from an investor to potentially restructure and pay for massive liabilities from the sweeping recalls.
In 2015, Takata admitted in a separate $70 million settlement with U.S. auto safety regulators that it was aware of a defect in its airbag inflators but did not issue a timely recall.
The settlement is expected to include restitution to some victims and automakers, who have been forced to recall millions of vehicles with the defective inflators. All but one of the 11 U.S. deaths have taken place in Honda Motor Co. vehicles. The Japanese automaker and Takata have settled nearly all lawsuits filed in connection with fatal crashes.
Five more deaths from the defective airbags have been reported globally.
In recent years, the Justice Department has had an unprecedented number of criminal investigations into wrongdoing by automakers and suppliers, reaching major settlements with Toyota Motor Corp., Volkswagen AG, and General Motors.
The antitrust arm of the Justice Department also has executed the largest industrywide price-fixing and bid-rigging prosecution in its history against auto suppliers. Through November, that investigation has prosecuted 47 companies and 65 executives -- yielding more than $2.9 billion in U.S. criminal fines, almost all of them against Japanese auto suppliers. In that probe, Takata agreed to pay a $71.3 million fine for fixing the prices of seat belts in the U.S.
Automotive News contributed to this report.