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Saturday, January 14, 2017, 12:09

Takata to pay US$$1b penalty over air bag defect

By Reuters

Takata to pay US$$1b penalty over air bag defect
In this May 4, 2016, file photo, visitors walk by a Takata Corp. desk at an automaker's showroom in Tokyo. (AP Photo/Shizuo Kambayashi, File)

DETROIT/WASHINGTON - Japan's Takata Corp on Friday agreed to plead guilty to criminal wrongdoing and to pay US$1 billion to resolve a US Justice Department investigation into ruptures of its air bag inflators linked to at least 16 deaths worldwide.

The deal was announced hours after prosecutors in Detroit charged three former senior Takata executives with falsifying test results to conceal the inflator defect, which triggered the world's biggest automotive safety recall.

Takata will pay a US$25 million fine, US$125 million in a victim compensation fund, including for future incidents, and US$850 million to compensate automakers for massive recall costs, the Justice Department said. The auto parts supplier will be required to make significant reforms and be on probation and under the oversight of an independent monitor for three years.

READ MORE: Japan files criminal complaint over faulty air bag

The company's shares rose 16.5 percent in trading in Japan on news of the anticipated settlement, in which it agreed to plead guilty to a single felony count of wire fraud.

The settlement, which must still be approved by a federal judge in Detroit, 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," Shigehisa Takada, chairman and chief executive of Takata, 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."

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

Shigehisa Takada, chairman and chief executive of Takata

Starting in 2000, Takata submitted false test reports to automakers to induce them to buy faulty air bag inflators, according to the Justice Department. Takata made more than US$1 billion on the sale of the inflators and Takata executives fabricated test information about their performance, the department said in a statement.

A federal grand jury separately indicted three longtime Takata executives, all Japanese citizens, after a more than two-year US criminal probe.

Shinichi Tanaka, Hideo Nakajima, and Tsuneo Chikaraishi were indicted on wire fraud and conspiracy charges for allegedly convincing automakers while at the supplier to buy "faulty, inferior, non-performing, non-compliant or dangerous inflators" through false reports."

The Justice Department said the three were suspended in 2015 and not currently working for Takata. The six-count indictment, unsealed on Friday, said they knew around 2000 that the inflators were not performing to automakers specifications and were failing during testing, but they provided false test reports to automakers.

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 184 injuries have been linked to the inflators in the United States.

"They falsified and manipulated data because they wanted to make profits on their air bags," US Attorney Barbara McQuade told a news conference in Detroit.

McQuade, a self-described "soccer mom," said Takata had knowingly exposed her to the risk that a minor car accident would "send a metal projectile into my face."

Takata has 30 days to pay the US$150 million for victim compensation and the criminal fine and then up to a year to pay the remaining $850 million, or within five days of securing a financial backer. Reuters reported in November that Takata may file for bankruptcy as part of a restructuring.

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