U.S. fines Takata $70 million, bans ammonium nitrate in its air bags

By Money Times

Nov 05, 2015 07:41 PM EST

The National Highway Traffic Safety Administration fined air-bag supplier Takata Corp for $70 million and is ordered to stop manufacturing inflators that has ammonium nitrate.

According to Reuters, the NHTSA said the chemical causes the air-bags to rupture, which lead to accidents that caused seven deaths and almost 100 injuries in the US. The regulator said there are millions of cars that use Takata's defective airbags and they can't all be repaired by 2019 since there are not enough replacements parts.

Channel NewsAsia reported that Takata will still face further fines if the automakers that recalled their vehicles make it official that it was the air bag supplier's fault. If investigation determines that Takata is indeed at fault due to its air bags, then the fines will be slapped on them. If the company will be asked to pay $100 for each car, Takata will have to pay around $820 million, which is more than its current market value. Since 2008 to present, there have been about 40 million cars that have been unofficially recalled all over the world due to the air bag.

Honda, which is Takata's largest customer, said it was very troubled with how the air bag manufacturer manipulated and misrepresented their products. Honda makes out 10 percent of the air bag manufacturer's total global sale. According to theEconomic Times, Honda announced that it will no longer use Takata's air bag inflators, after NHTSA fined the airbag manufacturing company. Meanwhile, Toyota Motor Corp said it was testing Autoliv and Nippon Kayaku Co's air bag inflators to see if they could be an alternative provider.

Takata's share went down 11 percent Wednesday in Tokyo trade. The company announced earlier that it would pay the fine in six installment until October 2020. Its Chief Executive Shigehisa Takada said the air bag company has decided not to use ammonium nitrate after NHTSA's order. 

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