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

November 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 7 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”) 7 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 7 vehicles is December 

31, 2018. 

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 7 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 most 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 the case of driver-side airbags, controls incorporated 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. 
Mr. Jonathan Morrison

November 16, 2018

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CONFIDENTIAL BUSINESS INFORMATION REDACTED

 

 

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 at least 

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 7 vehicles. 

B. PG 7 Issues

Despite MBUSA’s rigorous efforts to launch the recall remedy for PG 7 vehicles on time, additional 

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

December 31, 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-five percent would be 

reached for the PG 7 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]. As noted in prior DAG and MBUSA 

communications to NHTSA, 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 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 
Mr. Jonathan Morrison

November 16, 2018

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CONFIDENTIAL BUSINESS INFORMATION REDACTED

 

 

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

PGs, including PG 7.

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 continue to significantly affect 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 7 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 countermeasures 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 7 

launch.

C. PG 7 Extension Request

MBUSA proposes to launch the PG 7 remedy in phased intervals, as soon as approximately twentyfive 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

November 16, 2018

Page 4

 

 

By executing this strategy, MBUSA will continuously launch the remedy for vehicles within PG 7 in 

phases, beginning by January 31, 2020, and will have launched the remedy for the remaining

vehicles from PG 7 by February 28, 2020. MBUSA currently anticipates that it will have the 

necessary remedy parts available to begin launching the PG 7 remedy for certain models by January 

31, 2020, as shown in the table below.

PG 7

Make Platform Model Model 

Years Launch

Mercedes-Benz 204 C-Class PAB (A) 2012 by January 31, 2020

Mercedes-Benz 207 E-Class Cabriolet PAB (A) 2012 by February 28, 2020 

Mercedes-Benz 207 E-Class Coupe PAB (A) 2012 by February 28, 2020

MBUSA respectfully requests an extension of time to fully comply with the PG 7 launch deadlines to 

February 28, 2020. Of course, MBUSA will launch the remedy for these models sooner if 

replacement parts become available.

* * *

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

information.

Sincerely,

R. Latane Montague

Attachment: 

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

Cc: Stephen Hench, Esq.

R. Thomas Brunner