DETROIT -- Takata Corp. has agreed to plead guilty to a criminal charge and will pay $1 billion in fines and restitution for a yearslong scheme to conceal a deadly defect in its automotive air-bag inflators.
The U.S. attorney's office in Detroit announced the deal Friday, hours after it unsealed a six-count grand jury indictment against three former Takata executives who are accused of executing the scheme by falsifying and altering test reports that showed the inflators could rupture.
Takata inflators can explode with too much force, spewing shrapnel into automobiles. At least 11 people have been killed in the U.S. and 16 worldwide because of the defect. More than 180 have been injured.
Under the deal, Takata will pay a $25 million criminal fine, $125 million to people injured by the air bags and $850 million to automakers that purchased the inflators.
A federal judge will be asked to appoint attorney Kenneth Feinberg to distribute restitution payments.
Payments to individuals must be made soon. Money due to automakers must be paid within five days of Takata's anticipated sale or merger. Takata is expected to be sold to another auto supplier or investor this year.
"Automotive suppliers who sell products that are supposed to protect consumers from injury or death must put safety ahead of profits," said Barbara McQuade, the U.S. Attorney in Detroit, whose office worked on a two-year investigation into the company. "If they choose instead to engage in fraud, we will hold accountable the individuals and business entities who are responsible."
The Justice Department was criticized for failing to charge any individuals in earlier high-profile cases against automakers General Motors and Toyota. Now it's done so twice in one week. Prosecutors disclosed the indictment of six Volkswagen executives Wednesday when they announced a settlement of a criminal investigation into the German car company's emissions-cheating scheme.
On Friday, prosecutors unsealed a Detroit federal grand jury indictment of three former Takata executives, Shinichi Tanaka, Hideo Nakajima and Tsuneo Chikaraishi. All were suspended by the company last year. Takata, based in Japan, has its U.S. headquarters in the Detroit suburb of Auburn Hills.
According to an indictment, as early as 2000 the three falsified and altered reports to hide from automakers tests that showed the inflators could rupture or otherwise fail to meet specifications. They were charged with six counts of conspiracy and wire fraud. Takata was charged separately with one count of wire fraud. All three worked in Japan and at Takata's U.S. operations.
"Defendants commonly referred to the removal or alteration of unfavorable test data that was to be provided to Takata customers as 'XX-ing' the data," the indictment says. In June 2005, Nakajima said in an email that "they had no choice but to manipulate test data, and that they needed to 'cross the bridge together.'"
Tanaka served as executive vice president of inflator global operations, while Nakajima was director of engineering in the automotive systems laboratory and Chikaraishi was chief of Japan-Asia inflator operations, according to prosecutors.
All three are now in Japan, and McQuade said her office will work with authorities there to extradite them to the U.S. for trial. "Extradition is not automatic. It is discretionary with Japan," she said. But she added that her office has had success in extraditing Japanese executives in automotive parts price-fixing cases.
The settlement is a milestone in a process to secure investments in Takata, Shigehisa Takada, chairman and chief executive officer, said in a statement.
"Takata deeply regrets the circumstances that have led to this situation," Takada said.
As of 2015, Takata was the second-largest supplier of air bags in the world, accounting for 20 percent of the air bags sold.
There are 46 million recalled Takata air bag inflators in 29 million vehicles in the U.S., the National Highway Traffic Safety Administration said. More recalls are expected over the next three years, affecting as many as 69 million inflators in 42 million vehicles, the agency said.
The recall costs alone could amount to more than $8.8 billion, according to Takaki Nakanishi, an analyst at Jefferies Group LLC.
The government said Takata had minimal internal controls and failed to notice its executives' misconduct for years. It alleged that Takata falsified test data to deceive automakers that used its inflators. Once senior Takata executives did learn that employees had falsified air-bag reports, in 2009, they failed to take disciplinary action against those employees until 2015.
McQuade said Takata wanted to make profits on air bags "knowing that they were creating a risk for the end user, soccer moms like me who drives around in my Ford Edge with my kids, who at any moment could get involved in a fender-bender and send a metal projectile into my face," McQuade said. "The risk that they allowed to happen is really reprehensible."
U.S. Sen. Bill Nelson, D-Fla., has been a vocal critic of Takata and led a review of the company's air-bag testing last year.
"Companies have a responsibility to ensure that the products they make are safe for consumers," Nelson said Friday. "These indictments send a strong message that if company executives knowingly put deadly products on the market, they will be held accountable for their actions."
The breadth of the Takata scandal demonstrates one of the pitfalls of the automobile industry's global supply chain. Automakers increasingly buy identical parts from the same provider when that part is common to all vehicles, meaning product deficiencies may then affect a wider market than in the past.
"Corporate ethics and quality control have always been important elements in automotive design and production," said Karl Brauer, an analyst at Kelley Blue Book. "Takata's deficiency in both areas has impacted tens of millions of cars, caused death and suffering in multiple markets, and will ultimately cost the industry billions of dollars to address."
Information for this article was contributed by Tom Krisher, Dee-Ann Durbin and Ed White of The Associated Press; by Steven Overly of The Washington Post; and by Margaret Cronin Fisk and Jamie Butters of Bloomberg News.
Business on 01/14/2017