Takata Corp.'s bankruptcy filing last month was meant to draw a line under the auto industry's biggest safety recall, but last week's announcement of more air bag inflator recalls suggests automakers could face fresh liabilities in the future, Reuters reported yesterday. In late 2015, U.S. regulators gave Takata until the end of 2019 to prove that its air bag inflators — which now have a drying agent to combat moisture that can degrade the ammonium nitrate compound in its inflators, with potentially lethal results — are also safe. If Takata fails that test — and some industry consultants, explosives experts and former employees question whether the workaround guarantees safety over the long term — it may have to recall all its ammonium nitrate-based inflators. That could include the around 100 million inflators already slated for recall, and 100 million inflators Takata has produced to date with a drying agent. Takata says a third of those desiccated inflators have been used as replacements in the ongoing recall, with the rest going to automakers as part of regular supply contracts. Takata's automaker customers, which have so far borne much of the estimated $10 billion cost of replacing faulty bag inflators, could be on the hook for future liabilities in the event that Takata fails to prove that the desiccant workaround is sufficient.
Lawyers for people injured by Takata Corp's defective air bags told a U.S. judge yesterday that there was "no basis" for an "unjust" request by the company's U.S. unit to halt hundreds of consumer lawsuits against car companies that used the air bags, Reuters reported. When the U.S. unit filed for bankruptcy in June, litigation against the unit for injuries, wrongful death, economic losses and breaches of consumer protection laws were automatically stayed. Last week, Takata's U.S. unit asked for a preliminary injunction that would halt similar lawsuits against Honda Motor Co., Toyota Motor Corp. and other car companies that used the air bags. Halting the litigation would help Takata sell its healthy business to Key Safety Systems, which is owned by China's Ningbo Joyson Electronic Corp, according to TK Holdings Inc., the U.S. unit. Funds from that $1.6 billion proposed sale will be used to compensate injured drivers, according to court papers filed in the U.S. Bankruptcy Court in Wilmington, Del.
The global recall of Takata Corp's defective air bags widened last week and the number of confirmed deaths rose, but legal experts said that the bigger worry for car companies caught in the fallout is playing out in a Delaware bankruptcy courtroom, Reuters reported today. Earlier this month, people injured by the air bags, which degrade over time and can inflate with excessive force, were appointed to their own official committee in the Japanese company's U.S. bankruptcy, giving them a powerful voice in the proceedings. This committee, which includes people whose cars lost value due to the recall, will be pitted against Honda Motor Co, Toyota Motor Corp, and other automakers. The car companies have been trying to use the bankruptcy to limit their liability for installing the faulty air bags, said Kevin Dean, a Motley Rice attorney who represents injured drivers on the committee. Because the committee has official status, Takata must provide it with funds which can be used to investigate the automakers' liability or to challenge financial assumptions. Without a committee, plaintiffs' lawyers would typically have to pay for that themselves. “If I were a plaintiffs’ lawyer, this would be a golden goose for me,” said John Pottow, a professor at the University of Michigan Law School, of the appointment of the special committee. In the Takata case, the committee of injured drivers will sit alongside another made up of suppliers and vendors, who are likely more interested in the future of the business than compensation disputes, according to bankruptcy attorneys who are not involved in the case. Both committees were appointed by the U.S. Trustee's Office. Seventeen fatalities, including one confirmed last week, and at least 180 injuries have been tied to Takata's air bags since at least 2009. Read more.
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