Japanese Car Part Maker Pleads Guilty to Fraud

Category: Business


Unlocking Word Meanings

Read the following words/expressions found in today’s article.

  1. fraud / frɔd / (n) – intentional dishonesty

    The Internet has become an instrument for fraud.

  2. defective / dɪˈfɛk tɪv / (adj) – characterized by damage

    I immediately returned the defective device.

  3. merge / mɜrdʒ / (v) – to join or combine

    The two companies merged to increase their profits.

  4. implicate / ˈɪm plɪˌkeɪt / (v) – to be involved in

    The innocent man was implicated in the crime.

  5. indict / ɪnˈdaɪt / (v) – to accuse someone of a crime

    The CEO was indicted for corruption.


Read the text below.

Japanese automotive parts manufacturing company Takata pleads guilty to fraud involving defective air bag inflators.

The company admitted to concealing evidence showing that its airbag inflators can be activated with excessive force—a defect that allegedly caused at least 16 deaths and 180 injuries. When exposed to high temperatures and humidity, the chemical used in the inflators can blow up with enough force to destroy a metal canister and injure passengers.

To compensate for the damages, Takata was made to pay $850 million to automakers, $125 million to victims, and $25 million to the US government. Although the company was supposed to pay the government as high as $1.5 billion, the judge presiding in the case explained that the amount was out of the company’s financial capacity. Yoichiro Nomura, Takata’s chief financial officer, then agreed to either sell the company or merge it with another business. One potential buyer is Key Safety Systems Inc., a developer of safety products for automotive and non-automotive markets.

Five automotive companies were also implicated in the scandal. Honda, Toyota, Nissan, Ford, and BMW were indicted for continuing to use Takata’s airbag inflators to cut down on expenses despite having knowledge of the hazards. In their defense, the car companies stated that they should not be held accountable because they were deceived by Takata.

The scandal has resulted in the Japanese automotive industry’s biggest recall, which involved around 70 million airbags in 42 million automobiles.

Viewpoint Discussion

Enjoy a discussion with your tutor.

Discussion A

• In what ways can Takata compensate victims of the defective airbag inflators?
• If you were a business owner, would you consider buying or merging with Takata? Why or why not?

Discussion B

• What should customers do when they receive a defective product?
• Aside from being sold defective products, in what other situations can customers take legal action against a company?