Lawmakers: Takata Bankruptcy Could Leave Consumers On The Hook For Repairs

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Facing billions of dollars in losses related to fines, penalties, repair costs, and other expenses connected to the massive recall of shrapnel-shooting airbags, Takata is reportedly looking at restructuring through bankruptcy as an option. But if the auto parts maker goes this route, would we all be stuck footing the bill to replace the defective safety devices? 

That’s the concern for two lawmakers after reports that Takata could file for bankruptcy or sell itself, potentially throwing a wrench into a consent decree that outlines how the auto parts maker will fix affected vehicles as handed down by the National highway Traffic Safety Administration last year.

Senators Edward Markey (MA) and Richard Blumenthal (CT) sent a letter [PDF] to NHTSA chief Mark Rosekind Monday questioning how the agency will ensure that Takata fulfills its obligations under the consent decree.

“We have reason to believe that the circumstances surrounding Takata’s financial viability have deteriorated,” the senators wrote, citing recent reports that the company had “shortlisted six or seven companies, including a competitor and private-equity fund, as potential financial investors to bail out the Japanese parts maker.”

Bloomberg, citing people familiar with the matter, reported last week that five companies have offered initial investments of $1 billion to $2 billion each to buy the troubled airbag maker. Each of those offers contains some sort of mention of a proposed bankruptcy.

“We remain extremely concerned that in the event of Takata’s bankruptcy or significant restructuring, it could be consumers who are left with the costs of repairing their defective vehicles and additionally that past or future victims of this safety defect may also be left behind as other creditors lay first claim to Takata’s assets,” the senators write.

The pair also expressed concerns that any bankruptcy or restructuring may “not occur in a manner that prioritizes Takata’s ability to design and deploy safe replacements for the defective airbags over the short-term financial interests of any potential investor or buyer.”

Markey and Blumenthal note that there is precedent for regulatory agencies to assert their authority in bankruptcy proceedings in order to uphold settlements and consent decrees.

“This is especially true in the motor vehicle safety context, where such regulatory power is intended ‘to ensure that consumers are adequately protected from any safety defect or noncompliance determined to exist in a manufacturer’s products,’” the senators write, calling on NTHSA to take “all necessary” steps to “ensure that the Takata recalls are safe, effective and paid for, and to protect unduly harmed consumers and potential claimants.”

The lawmakers also asked the agency to specifically detail — by Oct. 14 — how it will ensure that all future replacement parts are safe, victims of Takata airbag deaths or injuries will be able claim and receive compensation they are entitled to, and that automakers and vehicle owners are properly compensated for fixing the defective airbags.