Takata files for bankruptcy as it buckles under pressure of numerous lawsuits

The motor industry was shaken by revelations of Takata’s dangerous airbags that have the potential to explode and shoot shards of metal into the cabin of a car. As one of the world’s largest producers of airbags, its inflatable devices are used in vehicles made by Honda, Mazda, Toyota, Subaru and BMW.

After at least 17 deaths reportedly linked to Takata airbags, and further reports of injuries caused as well, automakers have been forced to recall millions of cars and are looking to recover the costs of recalls and lawsuits from Takata.

The Takata airbag scandal

The Japanese-made airbags are reportedly vulnerable to spontaneous explosion when exposed to humidity, high temperatures and high-temperature cycling. The explosions can be incredibly dangerous as metal shards can fire out, posing an obvious risk.

It was also revealed that the company allegedly knew about the volatile nature of the substances they were using to inflate their airbags. They nevertheless went ahead with using the compound as it was cheaper than the safer alternative.

It seems that a move to cut costs has now cost them everything.

Concerns over airbags being re-used

In addition to this huge mess, there are growing concerns that recalled devices are making their way into used cars. In one case, a recalled airbag in a wrecked car was taken to the salvage yard but removed and reportedly fitted into a 2002 Honda Accord. An unsuspecting 19-year-old woman was then killed by the airbag as a piece of shrapnel shot into her neck when it exploded, puncturing her trachea.

Honda says it has bought 75,000 of the recalled inflators from salvage yards to keep them from being put back into used cars.

Massive lawsuits

Lawsuits from owners have cost Nissan $98 million; a sum Nissan is keen to recover from Takata. Mazda recalled 80,000 of their vehicles to replace the dangerous airbags; a necessary move that would have nonetheless caused a lot of annoyance for owners and cost a significant amount for having to purchase the replacement parts and fix the vehicles free-of-charge for the owner.

Honda have agreed to pay out over $484 million over their customer’s financial losses and to pay for replacing the faulty airbags. Honda has set aside $40 million just to reach owners of older Honda vehicles that may carry the volatile devices.

Court approval for cases

Takata’s consumers, car makers and shareholders wasted no time in demanding compensation for the damages the Japanese car parts maker has caused. A Preliminary court approval has been received for a $533 million settlement to be paid to Toyota, Subaru, Mazda and BMW.

However, Takata’s funds are said to be low, and there are worries as to whether the company can afford to pay for all the damages caused. In filing for bankruptcy, Takata has handed its funds to the authorities to decide how to compensate consumers whilst protecting tens of thousands of jobs.

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