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Takata failed to report 2003 air bag rupture to U.S. road authority

[September 24, 2016] By David Shepardson and Paul Lienert

WASHINGTON/TOKYO (Reuters) - Japanese air bag supplier Takata Corp said it failed to inform the U.S. auto safety agency of a 2003 rupture of one of its air bag inflators in Switzerland, according to an internal Takata report released by U.S. regulators on Friday.

Takata also said in the report that its U.S. arm, not the parent company, was largely responsible for designing, testing and producing tens of millions of defective air bag inflators.

The National Highway Traffic Safety Administration (NHTSA) released a series of reports into Takata's defective air bag inflators, which have been linked to at least 14 deaths and more than 100 injuries and sparked the largest-ever auto recall.

About 100 million Takata air bag inflators have been declared defective worldwide. In the United States, nearly 70 million inflators have been declared defective.

The internal Takata internal report released on Friday examined the Japanese company's handling of the problems since the inflators were first produced in 2000 as well as outside experts' analysis of the defect.

In one event detailed in the report, Takata said it did not inform the NHTSA when it learned in 2003 of the rupture of an inflator in Switzerland. A U.S. engineer at Takata asked if that incident should have been disclosed to the NHTSA in 2010, but it was not. Reuters reported on the 2003 incident in December 2014.

Takata said in its report it opted not to disclose the incident because the inflator was not made during the production period addressed in its 2010 response to the NHTSA. The report said the 2003 incident was the result of the Takata inflator being overloaded. Takata made production changes to address the problem in 2003.

Takata spokesman Jared Levy said Friday the report was required by NHTSA as part of the company's settlement announced in November. "Takata has focused extensive resources on researching and testing of airbag inflators, including working with independent, world class, technical experts to identify the causes of the inflator failures," he said.

Reports released on Friday included one from Germany's Fraunhofer Group commissioned by Takata, which said prolonged exposure to moisture and hot conditions could cause the propellant used in inflators to become more volatile. This finding was consistent with Fraunhofer's previous assessments and other independent analyses.

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The logo of Takata Corp is seen on its display through a vehicle at a showroom for vehicles in Tokyo, Japan, May 11, 2016. REUTERS/Toru Hanai/File Photo

In November 2015, Takata agreed to a settlement that included a fine of up to $200 million with NHTSA, which said Takata provided "selective, incomplete or inaccurate data" from 2009 to the present.

Once Takata's largest customer, Honda Motor Co late on Friday said that the parts supplier had "manipulated" test results for inflators supplied to the automaker in "several instances", and that it "remains disappointed and troubled" by Takata's actions.

Following its audit of Takata test results, the Japanese automaker said in a statement that as a precaution it was investigating the safety of inflators used in some cars that contained a specific moisture-absorbing agent. Inflators containing this agent have not been included in the latest recall.

Honda has studied Takata's tests on inflators installed in Honda and Acura vehicle in the United States and Canada, many of which have since been recalled. The automaker said it was now validating Takata tests on inflators installed in vehicles outside that region.

Honda has since stopped using Takata inflators in its new models and now sources replacement inflators from other suppliers.

Shares in Takata fell this week after Bloomberg reported that initial bidders in a potential rescue are considering the possibility of some form of bankruptcy proceedings for the company.

People with direct knowledge of the bidding process told Reuters in late August that Takata would take initial bids from potential rescuers, including Japanese chemical maker Daicel Corp, China's Ningbo Joyson Electronic and global funds KKR & Co and Bain Capital LP.

(Additional reporting by Naomi Tajitsu in Tokyo; Editing by Jeffrey Benkoe and Diane Craft)

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