Takata Corp has reached a settlement with two groups representing victims of its faulty air bags, paving the way for the company to exit Chapter 11 bankruptcy and move forward with a reorganisation plan, according to court documents.
Two committees for people suing over the air bags have agreed to support a bankruptcy-exit plan that would resolve lawsuits by channeling them into a trust funded in part by the sale of Takata assets.
Takata was forced into bankruptcy amid lawsuits, multimillion-dollar fines and crushing recall costs involving the air bags.
Thirteen automakers have joined the agreement, including General Motors and Ford Motor Co. and Toyota Motor Corp. The manufacturers, which are both Takata’s largest customers and biggest creditors, are indemnified in their agreements with Takata from losses and liabilities related to the air bag inflators.
Bankrupt air-bag provider, Takata has requested that all lawsuits against automakers be dropped by injured people.
The company asked a federal judge to suspend the lawsuits saying that litigation would distract management from completing the sale of the company’s operations. The company is attempting to sell its viable operations to Key Safety Systems for $1.6 billion.
The request did not go down well with the lawyers representing the complainants, saying that it could delay lawsuits for six months or more.
According to news site, Reuters, the official bankruptcy committee that represents injured drivers said in court papers the injunction would have “human consequences” and prevent people from pursuing compensation.
An agreement has been reached where General Motors has agreed to pay $1.4 million to resolve a US Securities and Exchange Commission accounting case related to a faulty ignition switch. The faulty switch, which occasionally caused the engine to switch off unexpectedly and disable the airbags in a crash, was linked to 124 deaths and 275 injuries. Reuters reports that the deal would resolve charges that accounting control failures prevented GM from properly assessing the defective ignition switch, which led to vehicle recalls beginning in 2014.
The settlement has been reached with no admission of wrongdoing from GM, who said in a media statement, “The SEC settlement does not call into question any of GM’s current or prior financial statements or its disclosures,” and “Since the ignition switch recall, GM has been proactively and successfully resolving ignition switch issues with customers and regulators at both the state and federal level.”
The SEC claim that although GM personnel first noticed a safety issue in autumn 2012, GM’s internal investigation involving the defective ignition switch was not brought to the attention of accountants until November 2013. “Internal accounting controls at General Motors failed to consider relevant accounting guidance,” said SEC director Andrew M. Calamari in a press release. “Therefore, during at least an 18-month period, accountants at General Motors did not properly evaluate the likelihood of a recall occurring or the potential losses resulting from a recall of cars with the defective ignition switch.”
GM incurred over $2.8 billion of ignition switch-related costs, with billions more set aside for further recalls in 2014 and 2015. A settlement was reached in 2015 with the US Justice Department criminal investigation, at the cost of over $1.2 billion, and a further $1.5 billion was allocated to pay injury and death claims and settle lawsuits from investors.
Vehicles sold under GM in Australia and New Zealand were not affected by the faulty ignition switch recall.