States to forego most of $650M legal settlement with Takata

DETROIT—Japanese air bag maker Takata Corp. has reached a $650 million deal to settle consumer protection claims from 44 states and Washington, D.C., but only a fraction of the money will be paid due to Takata’s financial problems and bankruptcy.

In an agreement announced Thursday, the states said they will not collect the settlement so that victims of Takata’s faulty air bag inflators can get a bigger piece of the company’s remaining money. There’s an exception, though. South Carolina, which led the states, will get just over $139,000 to cover costs of the investigation.

Takata air bag inflators can explode with too much force and spew shrapnel into drivers and passengers. At least 22 people have died worldwide and more than 180 have been hurt.

Attorneys general for the states alleged that Takata concealed air bag safety issues and failed to disclose safety defects.

Takata was forced into bankruptcy last year amid lawsuits, multimillion-dollar fines and crushing recall costs involving air bag inflators that use the explosive chemical ammonium nitrate as a propellant.

The chemical can deteriorate over time when exposed to high heat and humidity and burn too fast, blowing apart a metal canister. A reorganization plan was approved last week by a federal bankruptcy judge in Delaware.