Hogan Lovells US LLP

Columbia Square

555 Thirteenth Street, NW

Washington, DC 20004

T +1 202 637 5600

F +1 202 637 5910

www.hoganlovells.com

August 16, 2018

CONFIDENTIAL BUSINESS INFORMATION REDACTED

Mr. Jonathan Morrison

Chief Counsel

National Highway Traffic Safety Administration

(NCC-111), Room W41-227 

1200 New Jersey Avenue, SE

West Building

Washington, DC 20590

RE: Docket No. NHTSA-2015-0055 – Mercedes-Benz USA Request for Extension 

of Priority Group 6 Sufficient Supply and Remedy Launch Deadline Under ¶ 

39 of the Third Amended Coordinated Remedy Order to Address Takata 

Recalls

Dear Mr. Morrison:

On behalf of our clients, Daimler AG (“DAG”) and Mercedes-Benz USA, LLC (“MBUSA”), and 

pursuant to ¶ 39 of the Third Amended Coordinated Remedy Order to address the Takata 

recalls, this letter requests an extension of time in which to comply with the sufficient supply and 

remedy launch deadline for Priority Group (“PG”) 6 vehicles, as set forth in ¶ 33 of the Fifth 

Amendment to the Takata Coordinated Remedy Order (“Fifth Amended Order”). Under ¶ 33 of 

the Fifth Amended Order, the sufficient supply and remedy launch deadline for MBUSA’s PG 6 

vehicles is September 30, 2018.1 

A. Background

As described in prior communications with NHTSA, MBUSA is implementing a recall remedy 

strategy that involves use of the superior technical solution of [guanidine nitrate (“GuNi”)] based 

inflators. These [GuNi] inflators are incorporated into the new airbag modules that are being 

used for all Mercedes-Benz vehicles affected by the Takata recall in the U.S., including the PG 

6 vehicles to which this letter relates. 

The inherent design of the affected Mercedes-Benz vehicles, where all affected driver-side 

inflators are integrated into the airbag module, necessitates the entire airbag module to be 

replaced for the recall remedy, and not just the inflator as with other OEMs. This is a complex 

task that must address significant design and performance requirements, due to the numerous 

subcomponents of the airbag module and, in case of driver-side airbags, controls incorporated 

 

1

In MBUSA’s April 5, 2017 extension request, MBUSA noted that it planned to replace the passenger side 

airbag modules in certain PG 9 and 10 vehicles at the same time as the driver side airbag modules were 

replaced in PG 6. This is consistent with DAG and MBUSA’s “one workshop visit” approach. These associated 

PG 9 and 10 vehicles are included in the current extension request, and references to PG 6 in this request 

should be read to include the associated PG 9 and 10 vehicles. 
Mr. Jonathan Morrison

August 16, 2018

Page 2

CONFIDENTIAL BUSINESS INFORMATION REDACTED

into the steering wheel. Carryover of PSAN module components into the new [GuNi] based 

modules is limited, resulting in either tooling modifications or new tools for a large number of 

components. 

DAG and MBUSA have worked closely with [Takata and its successor Joyson Safety Systems 

(JSS)] to develop and validate the [GuNi] based replacement modules. Working with [Takata 

and JSS], DAG and MBUSA have made every effort to streamline the development and 

approval process, including [establishing a new team at DAG tasked with airbag development, 

significantly increasing the number of development engineers hired, streamlining the number of 

airbag module designs, beginning the process of installing a second production line that 

ultimately will double passenger airbag module capacity, and expediting execution of validation 

tests]. 

DAG has also engaged in extensive negotiations with [JSS] to secure additional production 

capacity and has actively engaged with sub-suppliers to ensure adequate supply of needed 

subcomponents.

As NHTSA is aware from prior DAG and MBUSA communications, MBUSA and DAG remain 

subject to the limitations and capabilities of the [JSS] production and supply process, as well as 

changes in the global demand for inflators, which greatly impact all development and supply 

timelines. As described below, these limitations and changes, as well as other challenges 

outside of MBUSA’s control, are having a deleterious effect on MBUSA’s ability to launch the 

remedy for PG 6 vehicles. 

B. PG 6 Issues

Despite MBUSA’s rigorous efforts to launch the recall remedy for PG 6 vehicles on time, 

additional influencing factors beyond those described above are forcing MBUSA to delay the 

launch past the September 30, 2018 remedy launch deadline. These factors are outlined 

below.

1. Contractual Issues

For previous PGs, [Takata] had agreed to pre-produce airbag modules prior to final release by 

DAG, in order to allow DAG to take advantage of existing supply capacity during the final 

release steps and build up parts supply and expedite the launch dates. Contrary to DAG’s 

experience with earlier models within the Takata Recall, [Takata’s successor, JSS], did not 

consent to the pre-production of airbag modules prior to the formal finalization of the release 

process. This significantly affected the initial calculations as to when the sufficient launch supply 

threshold of twenty percent would be reached for the PG 6 vehicles.

An additional issue outside of DAG’s control related to the supply of parts by [JSS] is the lack of 

timely shipments from manufacturing plants to [JSS USA] in the U.S., due to internal contractual 

negotiations between [JSS and its subsidiaries] and [Takata]. To minimize delays in general 

and expedite shipments, DAG created a new process only for the U.S. for direct shipment of 

airbag modules from [RSE (JSS’s distribution subsidiary in Aschaffenburg, Germany)] to [JSS 

USA] in the U.S., where the modules are then picked up by Mercedes-Benz US International 

and shipped to MBUSA Parts Distribution Centers for distribution to authorized Mercedes-Benz 

dealerships. This measure was initiated in order to avoid any additional delays caused by 

inbound/outbound handling and transfer of the parts within the DAG Global Logistics Center in 
Mr. Jonathan Morrison

August 16, 2018

Page 3

CONFIDENTIAL BUSINESS INFORMATION REDACTED

Germany, which is normally part of DAG’s parts handling process. However, delays in the 

contractual negotiations relating to [the takeover of Takata by JSS], as well as due to [Takata’s 

bankruptcy filing] in the U.S., resulted in a temporary freeze on [Takata/JSS] internal delivery of 

parts from Germany to the U.S. between January and April 2018. This delay had an adverse 

impact on the availability of parts in the U.S., with a continued downstream effect on later PGs, 

including PG 6.

Although these contractual issues are beyond DAG’s control, DAG and MBUSA continue to 

make every effort to negotiate with [JSS and RSE] to secure additional production capacity and 

streamline delivery processes. Also, DAG and MBUSA have now implemented a process under 

which [DAG dictates its production plan to JSS and JSS then confirms the plan].

2. Additional Markets 

Recall mandates by the respective governmental agencies in relation to PSAN Takata inflators 

in other global markets have significantly affected the allocation of production capacity. Recall 

mandates announced in China (December 31, 2017), Taiwan (December 31, 2017), Australia 

(February 27, 2018), and New Zealand (February 27, 2018) have dramatically cut into the 

allocation of the supply capacity for replacement parts for the U.S. market. Although DAG 

continues to prioritize the U.S. market, the limitations on allocation of the supply capacity for the 

U.S. market due to recall mandates in other markets impacted the initial calculations as to when 

the sufficient launch supply threshold of twenty percent would be reached for the PG 6 vehicles.

Additional markets implementing wide ranging recalls similar to the U.S. recall, including models 

not sold in the U.S., also impacted the development and validation process for U.S. replacement 

parts. The development and validation of these parts needed to be adapted to address the 

certification and approval processes of the respective markets in addition to the U.S. 

requirements. This in turn impacted initial estimates with respect to the development and 

validation timelines for remedy parts in the U.S. market. 

 

3. Supply Chain Logistical Issues

Additional unforeseen challenges arose due to the limited capacity of [RSE’s] air freight 

contractors to transfer the airbag modules by air to [JSS USA] in the U.S. All modules for 

Mercedes-Benz passenger cars are manufactured in Europe and must be shipped as 

dangerous goods/hazardous materials. Globally, there are limited logistics capacities for 

hazardous materials, which has negatively affected the availability of parts in the U.S. Although 

MBUSA has taken counter-measures to mitigate these logistical challenges, such as direct 

supply to the U.S. and ensuring that all shipments to the U.S. are via air-freight, they have 

nonetheless caused a delay in the PG 6 launch.

C. PG 6 Extension Request

MBUSA proposes to launch the PG 6 remedy in phased intervals, as soon as twenty percent of 

the necessary replacement airbags are available to dealers. Within the intervals, MBUSA 

intends to launch the remedy for these remaining vehicles as soon as sufficient parts become 

available.
Mr. Jonathan Morrison

August 16, 2018

Page 4

By executing this strategy, MBUSA will continuously launch the remedy for vehicles within PG 6 

in phases, beginning by June 30, 2019, and will have launched the remedy for the last vehicles 

from PG 6 by September 30, 2019. MBUSA currently anticipates that it will have the necessary 

remedy parts available to begin launching the PG 6 remedy for certain models by June 30, 

2019, as shown in the table below.

PG 6 (and associated PG 9 and 10 models)2

Make Platform Model Model Years Launch

Mercedes-Benz X164 GL-Class DAB (Non-A) 2010 - 2012 by June 30, 2019

Mercedes-Benz 164 ML-Class DAB (Non-A) 2010 - 2011 by June 30, 2019

Mercedes-Benz 251 R-Class DAB (Non-A) 2010 - 2012 by June 30, 2019

Mercedes-Benz 212 E-Class DAB (Non-A) 2010 - 2011 by July 31, 2019

Mercedes-Benz 204

C-Class DAB/PAB a

(Non-A) 2010 by September 30, 2019

Mercedes-Benz 204

C-Class DAB/PAB b

(Non-A) 2011 by September 30, 2019

Mercedes-Benz X204

GLK-Class DAB/PAB a

(Non-A) 2010 by September 30, 2019

Mercedes-Benz X204

GLK-Class DAB/PABb

(Non-A) 2011 – 2012 by September 30, 2019

Mercedes-Benz C197

SLS-Class Coupe 

DAB/PAB b(Non-A) 2012 – 2015 by September 30, 2019

Mercedes-Benz R197

SLS-Class Roadster 

DAB/PAB b(Non-A) 2012 – 2015 by September 30, 2019

Mercedes-Benz C207

E-Class Coupe 

DAB/PAB a(Non-A) 2010 by September 30, 2019

Mercedes-Benz C207

E-Class Coupe 

DAB/PAB b(Non-A) 2011 by September 30, 2019

Mercedes-Benz A207

E-Class Cabrio 

DAB/PAB b(Non-A) 2011 by September 30, 2019

a

 Includes passenger airbag (PAB) from PG 9

b

 Includes passenger airbag (PAB) from PG 10

MBUSA respectfully requests an extension of time to fully comply with the PG 6 (and associated 

PG 9 and 10) launch deadlines to September 30, 2019.

Thank you for your consideration of this request. Please let us know if you need any additional 

information.

 

2 Certain PG 9 vehicles (MY 2010 E-Class Coupe PAB and GLK-Class PAB) and PG 10 vehicles (MY 2010 CClass PAB) are currently subject to a remedy launch deadline of September 30, 2018 pursuant to the Fifth 

Amended Order. The PG 10 vehicles that were not subject to the Fifth Amended Order (MY 2010-2011 CClass PAB, MY 2011E-Class Coupe PAB, MY 2011-2012 GLK-Class Coupe PAB, MY 2012-2015 SLS-Class 

Coupe and Roadster PAB and MY 2011 E-Class Cabrio PAB) are currently subject to a remedy launch 

deadline of March 31, 2019 pursuant to the ACRO.
Mr. Jonathan Morrison

August 16, 2018

Page 5

Sincerely,

R. Latane Montague

Attachment: 

Certificate in Support of Notice of Anticipated Shortage and Request for Extension

Cc: Stephen Hench, Esq.

R. Thomas Brunner