Takata admits defect, to pay $1 B penalty

DETROIT – Takata Corp. has agreed to plead guilty to a single criminal charge and will pay $1 billion in fines and restitution for a years-long scheme to conceal a deadly defect in its automotive air bag inflators.

The US Attorney’s Office in Detroit announced the deal Friday, hours after it unsealed a six-count grand jury indictment against three former Takata executives who are accused of carrying out the scheme by falsifying and altering test reports that showed the inflators could rupture.

Takata inflators can explode with too much force, spewing shrapnel into drivers and passengers. At least 11 people have been killed in the US and 16 worldwide because of the defect. More than 180 have been injured. The problem touched off the largest automotive recall in US history covering 42 million vehicles and 69 million inflators. It will take years for the recalls to be completed.

“The risk that they allowed to happen is really reprehensible,” said Barbara McQuade, the US Attorney in Detroit, whose office worked on the two-year investigation.

Under the deal, Takata will pay a $25 million criminal fine, $125 million to individuals injured by the air bags and $850 million to automakers that purchased the inflators.

A federal judge will be asked to appoint attorney Kenneth Feinberg to distribute restitution payments. He handled restitution in the General Motors ignition switch and BP oil spill cases, among others.

Payments to individuals must be made soon. Automakers must be paid within five days of Takata’s anticipated sale or merger. Takata is expected to be sold to another auto supplier or investor sometime this year.

“Automotive suppliers who sell products that are supposed to protect consumers from injury or death must put safety ahead of profits,” McQuade said. “If they choose instead to engage in fraud, we will hold accountable the individuals and business entities.”

The Justice Department was criticized for failing to charge individuals in earlier high-profile cases against automakers General Motors and Toyota. Now it’s done so twice in one week. On Wednesday, prosecutors disclosed the indictment of six Volkswagen executives when they announced the settlement of a criminal probe into the German company’s emissions-cheating scheme.

On Friday, prosecutors unsealed a Detroit federal grand jury indictment of three former Takata executives, Shinichi Tanaka, Hideo Nakajima and Tsuneo Chikaraishi. All were suspended by the company last year.

According to an indictment, as early as 2000 the trio falsified and altered reports to hide from automakers tests that showed the inflators could rupture. Each was charged with six counts of conspiracy and wire fraud.