Japanese automotive supplier Takata was slammed Friday with a $1 billion penalty from the U.S. Department of Justice for its misconduct in the largest automotive recall in U.S. history. Three senior executives were also indicted for their role in the cover-up that led to a total of 15 deaths and left hundreds of drivers and passengers injured by shrapnel from faulty airbags.
The settlement includes a $25 million criminal penalty, while Takata will also pay $850 million in restitution to automakers who purchased its defective airbags. Another $125 million will go towards a compensation fund for those harmed by the malfunctioning bags. On top of the fatalities, at least 184 people were injured in the U.S. alone.
The top executives were indicted for providing fraudulent information to automakers to encourage them to buy Takata airbags that were in fact made with "faulty, inferior, non-performing, non-compliant, or dangerous inflators," according to court filings.
A settlement of the ongoing investigation by the U.S. Department of Justice comes at a time when Honda and Ford are ordering new recalls related to those faulty airbags, which can overinflate when triggered by a crash, spraying shrapnel into the passenger compartment.
Takata has already settled with the National Highway Traffic Safety Administration, paying more than $200 million in fines. NHTSA has ordered a series of recalls covering tens of million of vehicles in the U.S. equipped with the Takata airbags. Globally, more than 42 million vehicles are involved in recalls.
The Back Story
The case centers around faulty airbag inflators that were produced at two North American facilities. Researchers initially believed they were improperly manufactured and are vulnerable to malfunctioning when used in regions with high humidity and heat, such as Southern Florida.
But a research panel funded by the auto industry last year determined that even Takata airbags used in drier, cooler climates could deploy over-aggressively. The problem appears to be linked to the explosive ammonium nitrate used to power Takata's airbags. It can begin to break down over time, with NHTSA data indicating up to 80 percent of the suspect bags can malfunction after a decade in operation.
While Takata officials initially resisted efforts to expand an early series of recalls, they ultimately relented following congressional hearings. Last spring, following word of new deaths linked to the bags, NHTSA added tens of millions more vehicles to the recall list.
Justice prosecutors launched their own probe, determining Takata had knowingly provided misleading test reports to users of its airbags, notably including Honda, the supplier's largest customer. The test results were ultimately deemed to provide "selective, incomplete or inaccurate data."
On January 11, the automaker announced it was recalling another 1.29 million vehicles to replace faulty airbags. Since the defect was first identified, Honda has recalled 11.4 million vehicles due to Takata.
Ford, meanwhile, recalled more than 816,000 vehicles equipped with Takata airbags this week, bringing its own total to date to about 3 million cars, trucks and crossovers. Dozens of manufacturers have been impacted, from niche players like Ferrari to giants like General Motors and Toyota.
The settlement of the Takata probe comes during a busy week for government authorities overseeing the auto industry. Volkswagen AG agreed to a $4.3 billion settlement linked to its rigging of diesel emissions tests. Meanwhile, the Environmental Protection Agency accused Fiat Chrysler Automobiles of rigging its own diesel engines.
Federal authorities had increased scrutiny of the auto industry under the Obama Administration. It remains to be seen how the incoming Trump administration will handle such oversight, after the president-elect declared interest in reducing government regulations.
The FCA diesel probe will be one test of the new administration's approach.