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Attorney General Grewal Announces Settlement with Takata Subsidiary Over Defective Auto Airbag Systems

On Feb 23, 2018

Attorney General Gurbir S. Grewal announced that New Jersey has reached settlement with TK Holdings, the U.S. subsidiary of Takata, over allegations that the company concealed deadly safety defects related to its vehicle airbag systems.

Part of a multi-state agreement between TK Holdings, 44 states and the District of Columbia, the settlement announced by Attorney General Grewal resolves an investigation by the states into the company’s failure to timely disclose known defects associated with airbag inflators containing phase-stabilized ammonium nitrate as a propellant.

Beginning in 2008, auto makers issued a number of recalls of vehicles containing Takata airbag inflators in response to incidents in which the airbags ruptured on deployment. At least 20 people have died worldwide as a result of the defect, and hundreds more have been injured.

The defect involves use by the manufacturer of phase-stabilized ammonium nitrate to inflate the airbags upon deployment. As the compound is exposed to heat and humidity over time – particularly in warmer and wetter regions – the propellant degrades. The inflator is then susceptible to explosive rupture on deployment. When a rupture occurs, the force of the blast can destroy the metal casing around the propellant, which can then spew shrapnel inside a vehicle’s passenger cabin.

New Jersey was among the states leading the TK Holdings investigation and settlement negotiations on behalf of the multi-state group.

“TK Holdings and its parent company betrayed the trust of countless consumers in New Jersey and across the nation by knowingly allowing them to purchase vehicles with defective air bags – air bags capable of maiming or killing vehicle occupants,” said Attorney General Grewal.

“This settlement is designed to protect consumers by putting in place terms to ensure the company will do what it is supposed to do going forward,” Grewal said. “That means continuing to work with auto manufacturers in order to replace its faulty air bags, compensating victims harmed by the failure of those defective air bags, and conducting any future business honestly, transparently, and in compliance with state and federal law.”

To date more than 50 million Takata airbags in more than 37 million vehicles have been recalled, with future projected recalls (through the end of 2019) likely bringing the total number of affected airbags to somewhere between 65 and 70 million.

New Jersey and the other states participating in the multi-state investigation alleged that TK Holding’s parent company, Takata, knew the airbag inflator posed a safety threat because of testing failures. In particular, Takata knew about several ruptures that occurred as early as 2004, but failed to properly notify regulators and the public of the serious danger posed by the defect. (Appropriate action to recall the unsafe inflators did not occur until November 2014.)

Furthermore, Takata admitted to manipulating testing data and submitting false and misleading reports to auto manufacturers as part of a criminal guilty plea in 2017. The participating states alleged that such conduct was unfair and deceptive, and that TK Holdings’ actions violated state consumer protection laws, including New Jersey’s Consumer Fraud Act.

A consent decree and settlement agreement outlining the terms has been presented to the U.S. Bankruptcy Court for the District of Delaware for approval. Under the settlement, TK Holdings and its successor, Reorganized TK Holdings, shall:

  • Not advertise or otherwise represent the safety of its airbag systems or phase-stabilized ammonium nitrate in any way that is false, deceptive, or misleading;
  • Not represent that its airbags 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 airbag systems using phase-stabilized ammonium nitrate as a propellant;
  • Comply with state and federal law as well as the NHTSA Consent Order and Coordinated Remedy Order; and
  • Continue to cooperate with auto manufacturers to ensure that replacement airbag inflators are made available as expeditiously as possible from all possible sources.
  • TK Holdings also has agreed to reimburse New Jersey and other participating states for their investigative costs, and for the projected value of their claims on behalf of consumers – approximately $650 million. However, in light of TK Holdings’ pending bankruptcy, New Jersey and the other participating states have agreed to subordinate any payment under the settlement to maximize recovery dollars available to consumers harmed by the airbag defect.

Deputy Attorney General and Assistant Section Chief Patricia Schiripo, and Deputy Attorneys General Jeff Koziar, Russell Smith and Robert Holup of the Division of Law’s Consumer Fraud Prosecution Section handled the Takata matter on behalf of the State.

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