Takata Settles with 44 States. No Dough, Though

Washington, DCTakata airbag failures have already killed 22 people and injured nearly 200 more. The ensuing lawsuits and recalls affect nearly 13 percent of registered vehicles in the United States (and as many as a third of the cars on the road in Australia). It was the largest automotive recall in history, and it drove the company into bankruptcy.

Therein lies the rub. It's not clear how much will be left for people who have been injured or those who will be injured in the future, since the exploding Takata airbags are still out there and are becoming more dangerous as they get older. People who have been injured may have to focus on a new phase of the fight.

AGs did the Right Thing

It was an impossible choice. The state attorneys general did what they could to establish Takata's legal liability with respect to state consumer protection laws. Takata will cover the costs of the lawsuit, but the states will take nothing else of the $650 million settlement in an effort to leave funds for individual plaintiffs. That's not necessarily much after the bankruptcy court is done with the carcass.

The company also agreed not to "represent that its airbags are safe unless supported by competent and reliable scientific or engineering evidence" or "falsify or manipulate testing data, or provide any testing data that the companies know is inaccurate." Cold comfort.

The settlement agreement reportedly clears the way for court approval of the plan of reorganization proposed by Takata's US unit and helps ensure the sale of Takata's non-air bag inflator businesses to Key Safety Systems, a unit of China's Ningo Joyson Electric Corp.

Who Benefits and How to be Made Whole?

The classic forensic question, "Cui bono?" or "Who benefits?" comes to mind. But a better question might be, "Where can people who have been hurt look to be made whole?" Some have suggested that the answer lies in the way litigants dealt with the catastrophic Johns-Manville asbestos litigation and bankruptcy years ago.

Johns-Manville made widely-used insulating products containing asbestos for many years. Those products were linked to cancer. The litigation and settlements bankrupted Johns-Manville and left dying people and their survivors to suffer the consequences. Asbestosis has a long latency period, so these cases are still coming to light.

If parallels apply, people who are injured by faulty airbags may have no claim against a bankrupt manufacturer, but only against car makers, who installed the airbags with the knowledge that they were flawed. The lawsuits will not necessarily end at this point, but they do seem to be entering a new phase.