Airbags are meant to make driving safer. For years, though, some made by Takata, a Japanese company, inflated with such vigor that shards of metal and plastic were launched at occupants of vehicles in even minor collisions, causing serious injury and in some cases death.
The costs of the biggest-ever recall of vehicles, hauled back to correct the problem, and the associated lawsuits claimed another victim on June 26 when Takata itself filed for bankruptcy in America and Japan, and sold its surviving operations to a competitor, Key Safety Systems.
It is the latest in a series of self-inflicted wounds by Japanese corporate giants. Takata’s travails come on the heels of other disasters, including insolvency at Sharp, a formerly dominant consumer-electronics firm, and massive losses at Toshiba, a nuclear-power-and-consumer-electronics empire. All suggest a recurring pattern of lack of transparency and leadership.
Takata’s bankruptcy is due to its airbags’ use of chemical propellants which become unstable after long-term exposure to heat and humidity. However, the crisis is also due in part to the company’s lengthy concealment of a problem during which faulty bags caused at least 17 deaths and 10 times as many injuries globally. The danger from exploding airbags was clear to Takata long before it came to wider attention, but, instead of coming clean, managers altered test results to hide it from customers.
In a January settlement of related criminal charges in America, the company agreed to pay $1 billion in fines and compensation to carmakers and consumers, and admitted to a cover-up of the airbag failures dating from the early 2000s. American prosecutors have charged three long-serving managers at the company with faking data to conceal the defect.
The settlement bill is dwarfed by the scale of Takata’s overall liabilities. Once the world’s second-largest maker of airbags, it made airbags—including the faulty ones—for most of the world’s big carmakers. According to a court document submitted by T.K. Holdings, Takata’s American arm, this eventually will require the recall of 125 million vehicles, around half of them in America. Of the 46 million recalls issued in America so far, only a third of the vehicles have been put right. The cost of fixing the remaining cars worldwide, and of lawsuits from injured motorists, could be as much as $25 billion.
© 2017 Economist Newspaper Ltd., London (July 1). All rights reserved. Reprinted with permission.
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