Takata Airbag Scandal Leads to Bankruptcy

Defective Motor Vehicles
Takata Bankruptcy
Defective Airbags

By Lynn Shapiro, Staff Writer

Airbag manufacturer Takata Corporation filed for Chapter 11 bankruptcy in the US and Japan this week after being rocked by the biggest automotive recall in history involving its faulty airbags that can explode when activated, spewing shrapnel into vehicles that result in injury and death to drivers and passengers alike.

These explosions are linked to more than a dozen deaths and approximately 180 injuries in the US alone, causing the recall of 42 million vehicles and up to 69 million air bag inflators, according to The Washington Post

The troubled company also announced it would be acquired by Key Safety Systems for approximately $1.6 billion. Key Safety makes airbags, seat belts and other auto safety equipment, according to The New York Times.

According to Forbes, as many as 24 million vehicles from more than a dozen manufacturers are affected, including Ford, Volkswagen, Audi, Mazda, Honda, Saab and Mercedes-Benz.

Recall of Historic Proportions

The recall has crippled Takata financially. The company said it could not calculate the extent of anticipated lawsuits.

Tokyo Shoko Research, a credit-rating agency, estimated the company’s current liabilities at $15 billion.

“Takata owes billions of dollars to banks and auto makers, which have been paying to replace tens of millions of dangerous Takata airbag inflators. Because Takata has filed for bankruptcy, its creditors… will have a difficult time recovering money for the recalls,” the Times wrote.

Automakers Knew Airbags Were Faulty

Takata has agreed to pay the US government $125 million in compensation to its victims.

The company pled guilty in US courts for providing false data to US safety regulators.

Automakers are also culpable. They employed Takata’s inferior, less expensive technology despite signs the airbags and inflators were potentially deadly.

Takata offered to supply General Motors with a cheaper airbag than its competitor, the Swedish-American company Autoliv, asking Autoliv to match the cheaper design or risk losing GM’s business, Linda Rink, who was a senior scientist at Autoliv, told The Times.

But when Autoliv’s scientists studied the Takata airbag, they found it relied on a dangerously volatile compound in its inflator—ammonium nitrate--causing the airbag to explode,” The Times wrote.

“We just said, ‘No, we can’t do it. We’re not going to use it,” Robert Taylor, Autoliv’s head chemist until 2010, told The Times.

Even with the widespread recall, deadly accidents and studies critical of ammonium nitrate, Takata continues to make airbags with the chemical, and automakers continue to buy them.

Takata said in a statement “it had taken steps to protect the ammonium nitrate it uses against temperature changes, which along with moisture, the main factors contributing to its volatility,” The Times wrote.

A former Takata engineer who spoke to The Times disclosed how easily Takata avoided detection in bringing the defective airbags to market.

Workers at the Takata plant in La Grange, Ga., “manipulated tests meant to measure whether inflators were airtight,” said the engineer, who spoke on the condition of anonymity. His testimony in a lawsuit against Takata has not yet been made public.

“The tests involved inserting a small amount of helium gas into the inflators,” according to the Times.

 “The inflators were then put in a vacuum. If too much helium was detected outside the inflator, that meant it had a leak, was defective and should be scrapped.

 “But workers at the factory would take the defective inflators and test them repeatedly, to deplete the helium. With no helium left inside, the inflator would pass the test,” according to the engineer.

The workers would then assign new bar code identifiers so the repeated testing could not be detected.

The engineer said he questioned his Takata bosses in 2001 about manipulating the tests, but was told “not to come back to any more meetings.” He left the company later that year.

Honda, Takata’s biggest customer, said in a statement on Monday that the bankruptcy meant recovering money from Takata would be “difficult.”

Ticking Time Bombs

The National Highway Traffic Safety Administration (NHTSA) says as many as 69 million airbag inflators must be recalled, which will affect more than one in five vehicles on US roads.

It will take three years for Takata and other auto manufacturers to build enough replacement inflators, so NHTSA has initiated a multi-phased process to replace all airbags by 2019.

Older cars manufactured in 2011 and earlier, driven in hot, humid locals are being given priority.

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