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February 22, 2018

Takata’s U.S.-Based Company Settles with Dozens of States, Including Iowa, over Faulty Air Bags

States alleged company concealed safety issues affecting up to 70 million air bags; at least 20 dead and hundreds injured worldwide due to defect

(DES MOINES, Iowa) The bankrupt vehicle air bag maker behind the nation's largest automotive recall in history has agreed not to misrepresent its air bag systems or falsify testing data, through a settlement with 45 attorneys general, including Iowa Attorney General Tom Miller.

The agreement with TK Holdings Inc., the U.S. subsidiary of Tokyo-based Takata Corp., resolves allegations the company concealed safety issues related to its air bag systems installed in a wide variety of vehicles. The settlement concludes a multistate investigation into the company’s failure to timely disclose known safety defects associated with certain air bag inflators using phase-stabilized ammonium nitrate (PSAN) as a propellant.

Beginning in 2008, auto manufacturers issued a number of recalls of vehicles containing these air bag inflators in response to ruptures upon deployment of the air bag. More than 50 million air bags in more than 37 million vehicles have been recalled to date, with future anticipated recalls through the end of 2019 likely, bringing the total number of affected air bags to around 65 or 70 million.

The recalls involved the use of PSAN to inflate the air bags upon deployment. As the compound was exposed to heat and humidity over time, particularly in warmer and wetter climates, the propellant degraded. Consequently, upon deployment the inflator could rupture explosively, destroying the metal casing surrounding the propellant and spraying shrapnel into the vehicle’s passenger cabin. At least 20 people died worldwide and hundreds more have been injured as a result of this defect.

The attorneys general alleged that the company knew that its air bag inflator posed a safety defect because of testing failures. Last February, Takata pleaded guilty to manipulating testing data and submitting false and misleading reports to auto manufacturers. The company knew about several ruptures that occurred as early as 2004, but waited ten years to take appropriate action to recall the unsafe inflators. Despite this knowledge, the company failed to properly notify regulators and the public of the serious danger posed by this defect, which the states alleged violated state consumer protection laws.

Under the consent decree and settlement agreement, which was approved by the United States Bankruptcy Court for the District of Delaware, TK Holdings and its successor, Reorganized TK Holdings, shall:

  • Not advertise or otherwise represent the safety of its air bag systems or phase-stabilized ammonium nitrate in any way that is false, deceptive, or misleading
  • Not represent that its air bags are safe unless supported by competent and reliable scientific or engineering evidence
  • Not falsify or manipulate testing data, or provide any testing data that the companies know is inaccurate
  • Except as needed to fulfill its obligations under the various recalls, sell any air bag systems using PSAN as a propellant
  • Comply with state and federal law as well as the NHTSA Consent Order and Coordinated Remedy Order
  • Continue to cooperate with auto manufacturers to ensure that replacement air bag inflators are made available as expeditiously as possible from all possible sources

TK Holdings has also agreed to reimburse the multistate for its investigative costs, and for the entry of stipulated civil penalty in the amount of $650 million dollars. The states agreed that, given the pending bankruptcy and the company’s inability to pay its debts, money owed to consumers who were victims of the defect will take priority over the penalty.

TK Holdings filed a bankruptcy case in chapter 11 in June 2017, and its reorganization plan has been confirmed by the United States Bankruptcy Court for the District of Delaware.

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