Product defects lead to fatalities, global recalls, and reputational risk for buyers

# I. What happened?

The Japanese company Takata Corporation (Takata) has seen its share price fall dramatically from JPY 3,200 (USD 30) in January 2014 to just under JPY 400 (USD 4) as of August 2016, due to ongoing and systematic defects in its automobile safety airbags. The faulty airbags, which were fitted to vehicles manufactured by 14 automobile companies, including Ford, General Motors, Honda, and Volkswagen, have so far been blamed for 14 deaths and more than 100 injuries worldwide.

The problem concerns airbags that can allegedly explode and project metal fragments into the faces of passengers. In November 2014, the New York Times suggested that Takata was alerted to possible faults in its airbags as early as 2004, and subsequently carried out secret tests, which confirmed serious problems with the airbag inflators. However, the company allegedly destroyed the test data and failed to notify federal safety regulators.

At the end of 2014, Stefan Stocker, the President and CEO of Takata, resigned over the scandal.