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Car Makers Agree to Air-Bag Settlement -- WSJ

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05/19/2017 | 08:48am CEST
By Mike Spector 

Several auto makers agreed to pay more than $550 million to resolve claims stemming from rupture-prone Takata Corp. air bags, the latest legal settlement in a long-running safety crisis linked to numerous deaths and injuries.

Toyota Motor Corp., Subaru Corp., Mazda Motor Corp. and BMW AG reached a collective $553 million settlement with current and former owners and lessees of 15.8 million vehicles to address lagging repairs and financial losses associated with the air bags, which risk exploding and spraying shrapnel, according to court documents filed Thursday in a Miami federal court.

The air bags have been linked to 11 deaths and some 180 injuries in the U.S. alone. Thursday's settlement doesn't cover personal-injury cases that are also part of the sprawling litigation against Takata and auto makers that is consolidated in the Florida court.

Auto makers are in the process of recalling an unprecedented 42 million vehicles with nearly 70 million Takata air bags in the U.S., a crisis that has dented the supplier's finances and forced it to seek an investment from a rival and weigh a bankruptcy filing.

Other auto makers including Honda Motor Co., Ford Motor Co. and Nissan Motor Co. aren't part of the settlement, and still face lawsuits seeking recompense for financial losses, plaintiffs' lawyers said. Honda already provides rental cars to affected customers as the settlement disclosed Thursday proposes, and remains focused on tending to customers while continuing to participate in legal processes associated with the class-action lawsuits in Florida, a spokesman said. Nissan reminded customers to seek repairs but declined to comment on the settlement. A Ford spokeswoman had no immediate comment and Takata declined to comment.

Takata earlier this year pleaded guilty to criminal wrongdoing for providing misleading testing reports to auto makers on the air bags and agreed to pay $1 billion in penalties. That includes $850 million in restitution the Japanese automotive supplier must pay to auto makers.

That could help replenish auto makers' financial coffers diminished due to legal settlements such as the one unveiled Thursday. Takata and auto makers for years have been defending themselves against allegations lodged in the Florida litigation.

The latest settlement, which still requires approval from a federal judge, aims to speed up repairs of recalled vehicles. Of the four auto makers, Toyota has the best recall completion rate of only about 32% as of April 28, plaintiffs' lawyers said. BMW has only repaired roughly 16% of recalled vehicles.

The auto makers that are part of Thursday's deal have agreed to regularly contact consumers to encourage them to participate in the settlement and get vehicles repaired, through phone calls, mail, social media, online alerts and other methods. Some owners with air bags most at risk of rupturing will be provided rental cars while they await repairs.

Auto makers will also reimburse some expenses such as for transportation, storing or towing charges, child-care bills and lost wages during car repairs. In addition, they will pay residual distributions to consumers of up to $500 depending on how much money remains after meeting outreach and reimbursement obligations.

Plaintiffs' lawyers earlier this year alleged in court documents that some auto makers for years equipped millions of vehicles with Takata air bags to save money despite knowledge the devices could endanger motorists. Honda at the time said the allegations made false assertions that it and other auto makers behaved irresponsibly despite Takata admitting to deceiving the Japanese auto maker and other car companies.

Write to Mike Spector at mike.spector@wsj.com

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Shigehisa Takada Chairman, President & Chief Executive Officer
Yoichiro Nomura Director, General Manager-Finance & Accounting
Noriyuki Kosugi Director, Executive Officer & GM-Sales
Hiroshi Shimizu Executive Director & Executive Officer
Motoo Yougai External Director & Executive Officer
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