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Takata pays $1B for exploding airbags, stock price rises 16 percent

Have you driven a car anytime in the past decade?

Chances are quite good that the car was equipped with an airbag made by Takata, a Japanese company that supplies parts to all major automakers, from Ferrari to Honda.

Airbags are supposed to save lives, but Takata's airbags don't, at least those that explode upon inflation. Takata has just settled a case with the U.S. Dept. of Justice for $1 billion, and has pleaded guilty to one count of fraud. A few Takata executives themselves face criminal charges and are currently under indictment.

The Takata Airbag Story

A number of people in the U.S. (and worldwide) have lost their lives because of exploding Takata airbags. In Oct. 2016, a 50-year-old woman reportedly died from the airbag after a crash in California. She was the eleventh U.S. victim and was driving a 2001 Honda Civic.

NBC News describes the problem as such:

"Takata air bags can inflate with too much force, which causes a metal canister to rupture and spew shrapnel into the vehicle." In other words, rather than save your life - even in a minor crash that you should otherwise walk away from - these airbags could end it.

The troubling part is Takata executives knew about the problem years ago.

Takata Executives Filed False Test Reports

Three Takata executives were indicted in connection with the case, on charges of fraud and conspiracy, based on allegations that they falsified test reports as a way to sell parts to the major automakers - even though they knew about the defects (this happens to be reminiscent of VW's emissions scandal, in which VW executives falsified emissions test results).

Reuters quotes a federal prosecutor:

"Automotive suppliers who sell products that are supposed to protect consumers from injury or death must put safety ahead of profits."

Meanwhile, the market's perverse (but not unusual) response was to treat Takata to a 16 percent increase in its stock price.

Go figure.

Read more:

U.S. Confirms 11th Death Linked to Faulty Takata Airbag Inflator (NBC News)

Takata to plead guilty, pay $1 billion U.S. penalty over air bag defects (Reuters)

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