The Takata Airbag Crisis…Years to Make, Years to Fix. - Chuck Tatelbaum - Thursday 8/3

The Takata Airbag Crisis…Years to Make, Years to Fix.
Chuck Tatelbaum
Thursday 8/3

What are your chances of being killed because the air bag in your car explodes instead of inflating?  The answer, based on data in so far is about 1 in 5 million.  But for drivers in 2001, 2002 and 2003 Hondas and Acuras, The National Highway Traffic Safety Administration (NHTSA) thinks the risk is so high that it advises that you stop driving the car, take it to your dealer immediately, and hope he gives you a loaner while he services your recall.  

The Takata company that made the exploding air bags went bankrupt at the end of June.  It was, company officials said, overwhelmed by the $10 to $50 billion projected cost of payments to the families of the more than a dozen people killed and more than 180 injured by their product, and the cost of replacing the air bags in perhaps as many as 100 million cars worldwide.

30 years ago Takata was a respected supplier of seat belts and steering wheels for many of the world’s major manufacturers of automobiles. Then, about 20 years ago, Takata developed, not a better, but a cheaper air bag system that pretty quickly was such a hit with the industry that Takata became the second-biggest air bag supplier in the world.

But there were problems.  3 of them,  And they were all very serious.

The mechanical problem was that the ammonium nitrate that made the bag inflate could degrade over time, especially if it was exposed to moisture or heat or fluctuating temperatures, and the degraded ammonium nitrate could explode and create a lot of shrapnel inside the car.

The moral problem is, over a period of at least 15 years, and 14 to 16 deaths, and 180 or more injuries, Takata executives and engineers covered up the problem, failed to report it to the required auto safety agencies, failed to warn their customers, the car-makers, the car dealers, the car buyers, and failed even to discipline the people whom they found were hiding the problem.

And there’s the industry problem which is, somebody has to supply it with safe air bags, not to mention seat belts and steering wheels.

The industry problem seems to be solved by the bankruptcy agreement which essentially allows an American-based, but now Chinese-owned company Key Safety to buy for $1.6 billion the seat belt and steering wheel business. That money and Takata’s own remaining assets will go for a solution to the air bag problem — tens of millions of new air bags, with a drying agent to protect the ammonium nitrate from degrading.

But there’s also a money problem.  Takata almost certainly won’t have enough to make the replacement air bags, pay for the recalls to have them installed, and settle dozens of lawsuits in behalf of the families of the killed and injured.

Deciding who gets how much, and who gets their Takata money first is likely to be as difficult a problem to solve as the others, including the moral questions about who are the responsible parties and how should they be punished for years of lies that destroyed dozens of lives.



Charles M. (Chuck) Tatelbaum is an international law expert and senior attorney in the bankruptcy and creditors’ rights department at the Tripp Scott law firm.

Mr. Tatelbaum focuses his practice on bankruptcy and creditors’ rights issues, complex business litigation, Uniform Commercial Code transactions and lender liability litigation and other types of secured transactions, as well as domestic and international letters of credit.

He regularly represents secured and unsecured creditors in transactions and insolvency situations, creditors’ committees, and throughout the United States, he represents business clients in complex business litigation, the defense of lender liability claims, all types of bankruptcy proceedings and products liability defense based on warranty. He also represents secured and unsecured creditors in distressed business transactions and litigation. He has also has represented clients in Chapter 9 municipal bankruptcy proceedings and Chapter 15 foreign bankruptcy proceedings.



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