Takata Bankruptcy Case Nears Completion

Defective Motor Vehicles
Takata Airbags

By Sean Lally, Staff Writer

Takata set the stage for the completion of its Chapter 11 Bankruptcy case, after the company reached an agreement with those injured by the faulty airbag inflators, the various automobile manufacturers involved in the case and related creditors. With the Delaware Bankruptcy court’s approval, the manufacturer can now begin the process of reorganization.

The Recall

The recall, which was initiated in 2013, has ballooned to include at least 37 million vehicles and 60 manufacturers, making it the largest recall ever. The airbag inflator was designed using ammonium nitrate, which when overheated, can cause metal shards to rocket-off toward the driver and passengers. At least 22 people have perished thanks to this defective mechanism, and hundreds more have been injured around the world. To make matters worse, Takata and Honda both knew about the fault, as early as 2004, but did not report it to the National Highway and Traffic Safety Administration (NHTSA), according to a New York Times report released in 2014.

The Compensation

Now, after intensive proceedings involving Takata, auto manufacturers and the US Government, the victims can receive recompense for their injuries. A total of $850 million will be divided amongst the various manufacturers, and a remaining $125 million will go to the victims. During courtroom proceedings, the parties disputed over which victims should receive compensation. Eric Green – a Harvard law professor who has been assigned the task of handling the victims’ trust fund – suggested that the money be paid solely to victims within the boundaries of the United States.


Takata retorted in a court brief: “The plea agreement contains no geographic or nationality limitation on coverage of injured individuals." The brief continued, “Rather, the plain language is broad, and when considered in context of addressing Takata's global conduct, supports inclusion of foreign individuals injured outside the United States." But since Green has been given broad authority to determine how the money is handled, the US Government contended that Takata’s argument is baseless.

The Plan

Despite some initial disagreements, Takata was able to resolve its disputes with automakers and Key Safety Systems Inc. – a Chinese company that will acquire Takata – and in the end, the Delaware Bankruptcy court issued its approval of the bankruptcy plan. Victims will be paid monetary compensation, proportional to their injuries. Thus, those who have been bruised could receive $10,000, while victims who have lost loved ones could receive $5 million, according to court documents.

Manufacturers Pay Compensation

Compensation for victims will come from the $125 million trust and will be partially funded by automobile companies involved in the case. Thanks to an agreement that includes 13 automobile manufacturers, $189 million (out of the allotted $850 million) will be divided amongst the manufacturers, specifically for the purpose of settling claims with victims. As a part of the agreement, victims may not sue Honda, but Honda must settle claims filed by victims.

A lawyer representing dozens of drivers celebrated the judge’s approval: “We are pleased that Judge (Brendan) Shannon has approved what we believe to be fair options for current and future victims of Takata airbags that provide swift resolution and allow victims to try to move on with their lives.”


Key Safety Systems Inc. is set to acquire Takata by the end of the first quarter. The company signed a contract last year, promising to pay $1.6 billion for the acquisition and pledging to maintain all Takata employees, excepting the problematic airbag inflator division. A lawyer for Takata indicated in court that the US Government would finalize its review of the sale by March 26th.

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