U.S. Will Fine Takata $14,000/day for Resisting Air Bag Probe

Updated on
Foxx: Takata Did a `Record Dump' on U.S. Government

U.S. regulators said they’re fining Takata Corp. to help speed government efforts to solve the mystery of why millions of air bags in passenger cars may be at risk of exploding.

The company’s failure to cooperate with the National Highway Traffic Safety Administration has made it harder to know why the air bags are failing, Mark Rosekind, the agency’s head, said in an interview Friday.

“We still don’t have the root cause,” Rosekind said. “The safety issue has not been resolved.”

U.S. Transportation Secretary Anthony Foxx said earlier Friday that Takata hasn’t been completely forthcoming in its answers to investigators and will be fined $14,000 for each day it fails to cooperate. The fines could reach a maximum of $70 million based on U.S. law.

Takata said it was “surprised and disappointed” by the agency’s actions and statements. The Tokyo based air-bag maker said it has been in regular communication with the agency and has produced the documents requested. Takata’s engineers have been meeting with their counterparts at the agency and regulators have been kept informed about its testing, it said.

Document ‘Dump’

Foxx characterized the millions of pages of documents that Takata submitted as a “dump” that avoided responding to specific questions.

“We are using the maximum available penalty until Takata finds itself in compliance,” Foxx said. “We will not tolerate this.”

Takata said it disagrees with the “characterization that we have not been fully cooperating.”

NHTSA said it asked Takata to answer questions in separate special orders last year on Oct. 30 and Nov. 18, according to a letter sent to the parts maker. Takata has produced more than 2.4 million pages of documents but didn’t respond to requests for clarification on the agency’s specific questions, according to NHTSA.

“We have concluded that Takata is neither being forthcoming with the information that it is legally obligated to supply, nor is it being cooperative in aiding NHTSA’s ongoing investigation of a potentially serious safety defect,” the agency said in the letter to Takata.

Maximum Fine

Regulators are investigating air-bag inflators that may malfunction, deploying with so much force that the part breaks and hurls metal shrapnel at the car’s occupants. At least five fatalities in the U.S. and more than 100 injuries have been reported.

“We have a serious defect issue,” Foxx said Friday at an event in Richmond, Virginia. “We are working as hard as we can to get all the materials off of our roadways, and the company, Takata, has no reason not to comply.”

Automakers face fines of $7,000 per day for not abiding by a U.S. law known as the Transportation Recall Enhancement, Accountability and Documentation Act, which requires the companies to tell regulators about customer injuries, lawsuits, warranty claims and complaints.

The maximum civil penalty is capped by Congress at $35 million. Because NHTSA issued two special orders to Takata, the company faces a combined fine of $14,000 a day, with a final maximum penalty of $70 million.

GM Fines

NHTSA issued similar fines against General Motors Co. last year for failing to respond to requests for information about an investigation into an ignition-switch defect. GM eventually agreed to a consent order ending the fines and the agency’s investigation, promising to submit to added oversight as it overhauled its defect investigation practices.

Takata had been in a dispute with NHTSA over whether to initiate a national recall for some drivers’ side air bags. The company had said the defect was tied to high humidity, and it supported recalls limited to southern states with tropical weather.

Since then, all the automakers with cars that have Takata inflators, including Honda Motor Co. and Toyota Motor Corp., have begun national recalls. More than 20 million cars with Takata inflators have been recalled worldwide.

It’s unusual for NHTSA to be this aggressive, said Joan Claybrook, a Washington-based consumer advocate who led the agency in the 1970s. If Takata didn’t agree on the agency’s requests, it could have gone to court to seek clarification of what was needed. Refusing to act left NHTSA with few other options other than issuing the fines, she said.

“It’s a good thing,” Claybrook said. “Other companies are going to be more likely to obey the law. They don’t want to get themselves in the same crosshairs as Takata.”

Toyota Fine

If the company impedes NHTSA’s investigation, it could lead to a criminal probe similar to the one Toyota faced over cars that suddenly accelerated, Claybrook said. That resulted in a $1.2 billion fine.

“That’s the one thing that every chief executive fears the most,” Claybrook said. “It means the executive could go to jail.”

Takata’s penalties raised a larger issue about how transparent and proactive automakers are when it comes to dealing with potential safety defects. NHTSA has been asking Congress for more money and more power to force carmakers to change their behavior.

Faster Repairs

More actions will be coming in the Takata investigation, said Gordon Trowbridge, a NHTSA spokesman. The agency is considering whether to use its legal authority to order actions that could lead to faster repairs for consumers, which may include accelerated parts production, he said. The agency has never used that power before.

NHTSA expects to issue an order within the next few days to ensure the agency has access to the inflators that are being removed from cars and tested by Takata, automakers investigating air-bag failures and trial lawyers, Trowbridge said.

Foxx used the events on Friday to promote a White House transportation-spending proposal that also addresses vehicle safety. Among the powers the administration is seeking is the ability to raise NHTSA’s maximum fine from $35 million to $300 million.

One provision would ban the sale of used cars or renting cars with outstanding safety recalls. The proposal follows reports of deaths involving cars sold without recall repairs being done, like a fatal crash near Houston on Jan. 18 that killed Carlos Solis IV, a 35-year-old father of two.

Solis’s Honda Accord had been recalled for a defective Takata air bag in 2011. The repair still hadn’t been done when he bought the car in April.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE