Takata filing means less money for victims
As part of $1B U.S. settlement, automakers would get $850M, leaving little for injury suits
DETROIT — A bankruptcy filing by Japanese air bag maker Takata will leave little money for dozens of people who sued the company over deaths and injuries caused by its exploding air bag inflators, according to outside legal experts and lawyers suing the company.
Takata Corp. and its U.S. operations are likely to seek bankruptcy protection by the end of June in a deal that would sell its assets to competitor Key Safety Systems Inc., a person briefed on the talks said. The person didn’t want to be identified because discussions are in progress.
The price Key will pay is unknown, but much of it likely will go toward paying a $1 billion U.S. criminal settlement. Most of the settlement money will go to automakers as restitution for recall costs.
Key is expected to buy Takata’s assets “free and clear” of past liabilities, and lawyers say there won’t be enough money to give victims what they would have received if they were suing a healthy company.
So far the faulty inflators have killed 11 people in the U.S. and 16 worldwide. Over 180 people have been injured. The problem touched off the biggest recall in U.S. automotive history, involving 19 automakers, 42 million vehicles and up to 69 million inflators. About 100 million inflators have been recalled worldwide.
Some victims have serious facial injuries from metal shrapnel and would
win large verdicts if Takata were financially strong, lawyers say. Kevin Dean, a South Carolina lawyer who has 25 cases pending against Takata, said one of his clients, a 26-year-old man, will never be able to smile due to nerve damage.
“It destroys people’s faces. It’s just a horrible injury,” said Kent Emison, a Missouri lawyer whose firm is considering a lawsuit on behalf of a woman whose trachea was punctured by shrapnel.
Takata’s troubles stem from use of the explosive chemical ammonium nitrate in the inflators to deploy air bags in a crash. The chemical can deteriorate when exposed to hot and humid air and burn too fast, blowing apart a metal canister and spewing out metal fragments.
In February, Takata pleaded guilty to fraud and agreed to the $1 billion settlement. Lawyers acknowledged in court that the company would have to be sold to fund the settlement. Automakers would get $850 million in restitution for recall costs and a $25 million fine would be paid to the government. Takata already has paid $125 million into a fund for victims.
“Takata intends to try to use our bankruptcy laws to escape responsibility for the injured and the families of the dead,” said Bradford Child, a Los Angeles lawyer who represents the family of a woman killed by a ruptured inflator.
In a statement last week, Takata maintained the possibility of keeping the company in operation. A committee set up to explore restructuring has made a recommendation with Key as a suitor, but Takata’s board hasn’t decided on it.
Douglas Baird, a bankruptcy law professor at the University of Chicago, said he expects Key will get Takata’s assets without liability for past claims. Without this provision, no suitor would buy the company.
“It’s in the interests of all these victims that you have this free and clear sale,” he said. “The alternative is to liquidate the assets and sell them for kindling wood.”
Lawyers are unhappy that automakers will get $850 million while relatively little goes to victims. Emison and others say $125 million will go quickly, estimating that victims will get 5 to 10 cents on the dollar of what they would have received from a financially strong company. A courtappointed special master will come up with an allocation formula.
At the end of April, only 22 percent of the 69 million recalled inflators in the U.S. had been replaced under the recalls, leaving almost 54 million on the roads, according to the National Highway Traffic Safety Administration website. This means more inflators will likely explode and more people will be hurt in the future, Emison said.