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Takata nears US settlement over exploding airbags

Takata, the Japanese automotive supplier at the centre of a global recall crisis over its exploding airbags, is expected to plead guilty as early as Friday to criminal wrongdoing in the US, as the Obama administration targets the global auto industry with a final burst of fines over environmental and safety issues.

Takata is expected to agree to a criminal settlement with the Department of Justice on Friday afternoon, according to people close to the situation. The total settlement is likely to reach about $1bn, one of the people added. A deal could resolve a DoJ probe into the company’s rupturing airbags, and see restitution paid to carmakers that purchased the bags. It is unclear whether any Takata executives will be charged.

Shares in the embattled company rose 16 per cent in Tokyo on Friday as retail investors bet on a criminal settlement accelerating talks to find an outside investor to help Takata survive the safety scandal.

The episodes were linked to at least 17 deaths and more than 100 injuries worldwide, triggering a global recall that could affect more than 100 vehicle types sold by at least 13 carmakers.

The Obama administration is understood to be eager to add Takata to its list of automotive conquests, which have included Fiat Chrysler and Volkswagen in the past two days. Auto industry analysts expect the incoming Trump administration to take a much more relaxed approach to environmental and safety regulation, given Mr Trump’s intention to relax the regulatory burden on US business. 

Only hours before the Takata news, Fiat Chrysler said it could be facing a fine of up to $4.6bn after the Environmental Protection Agency accused the company of violating US emissions laws. Volkswagen earlier agreed to pay a $4.3bn criminal fine for deliberately evading US pollution laws. 

“Judging from the Volkswagen, Fiat Chrysler and now possibly Takata actions, the Obama administration agencies are closing the books on some big ones,” said Michelle Krebs, auto analyst at Autotrader.com. “Under a Trump administration, we may see some easing of regulations and may not see this kind of disciplinary action.”

Takata is still understood to be pursuing talks on a possible restructuring to deal with the costs of the global recall, and could seek US bankruptcy protection to clear the way for a takeover, said people close to the company.

“A settlement with US authorities is at least a starting point. But so many problems remain unresolved with the ongoing civil lawsuits and the search for a financial sponsor,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

The world’s leading carmakers including Honda, Toyota and Volkswagen are currently footing the estimated $10bn-plus cost of recalling their vehicles with potentially faulty Takata airbags, until they can establish why the inflators have a propensity to explode in humid conditions.

The automakers gathered last year in New York to review offers of between $1bn and $3.5bn from five groups for a controlling stake in Takata, but negotiations to reach a deal are taking longer than expected as some bidders have asked for more time to carry out deeper due diligence, according to people close to the sales process.

The two bidders most favoured by the carmakers are Autoliv, a Swedish airbag maker, and Key Safety Systems, an airbag manufacturer owned by China’s Ningbo Joyson Electronic, one of the people added.

Via FT