10. | NHTSA understands that the three research organizations have begun to
investigate the safety and service life of desiccated Takata air bag inflators that contain a phase-
stabilized ammonium nitrate-based propellant (the “desiccated Takata PSAN inflators”).°
IL. LEGAL AUTHORITY

11. | NHTSA issues this Amendment pursuant to its authority under the Safety Act, 49
US.C. § 30101, et seg., as delegated by the Secretary of Transportation, 49 C.F.R. § 1.95,
including, but not limited to, its authority to inspect and investigate, 49 U.S.C. § 30166(b)(1);
compromise the amount of civil penalties, 49 U.S.C. § 30165(b); ensure that defective vehicles
and equipment are recalled, 49 U.S.C. §§ 30118-30119; ensure the adequacy of recalls, 49
U.S.C. § 30120(c)(1); accelerate remedy programs, 49 U.S.C. § 30120(c)(3); and require any
person to file reports or answers to specific questions, 49 U.S.C. § 30166(g). It is AGREED by
Takata and ORDERED by NHTSA as follows:

Wii. DEFECT INFORMATION REPORT SCHEDULE

12. In light of the Agency’s findings, set forth in Paragraphs 2 through 10 above,
NHTSA has concluded that at some point in the future all non-desiccated frontal Takata PSAN
inflators will reach a threshold level of degradation that could result in the inflator becoming
unreasonably dangerous.

13. As described above, NHTSA has concluded that the data and root cause
explanations presented to the Agency by the three research organizations, and verified by
NHTSA’s independent expert, provide a determination of root cause by “credible source[s]”
under Paragraph 29(d) of the November 3, 2015 Consent Order. The Agency therefore invokes

its authority under Paragraph 29, and orders Takata to file certain Defect Information Reports

5 To date, there have been no test failures or field ruptures of desiccated Takata PSAN inflators, with the

exception of two ruptures of desiccated side impact Takata PSAN inflators (i.e., SSI-20), which were caused by an
identified manufacturing issue.


|
|
|
|

four months regarding: the Monitor’s activities; whether Takata is complying with
the terms of the Consent Orders dated May 18, 2015 and November 3, 2015, this
Amendment, and any other amendments thereto; any changes that are necessary
to foster Takata’s compliance with the Safety Act and/or any regulation
promulgated thereunder; and any developments associated with the Coordinated
Remedy Program, potentially including vehicle recall prioritization and
availability of replacement parts. Sixty days prior to the scheduled expiration of
his term, the Monitor shall submit a closing report to NHTSA assessing Takata’s
record of compliance with the requirements of the Consent Order.

(c) The reports from the Monitor to NHTSA under subpart (b) will
likely include proprietary, financial, confidential, and competitive business
information. Public disclosure of these reports could discourage cooperation, or
impede pending or potential agency investigations, the Coordinated Remedy
Program, and/or other agency decision-making, thereby undermining the
objectives of the monitorship. For these reasons, among others, the reports and
contents thereof are intended to remain and shall remain non-public, except, and
to the extent: (i) NHTSA determines that disclosure would be appropriate in
furtherance of the discharge of its duties and responsibilities, following
consultation with third parties as required under existing laws; (ii) otherwise

agreed to by the parties in writing; or (iii) otherwise required by law.

10


Zone:A/Population

TM ‘Zone B Population «|:

All vehicles not
currently under recall

All vehicles not
currently under recall

All vehicles not
currently under recall

currently under recall

currently under recall

containing non- containing non- containing non-
May 16, 2016 desiccated frontal desiccated frontal desiccated frontal

Takata PSAN inflators | Takata PSAN inflators | Takata PSAN inflators
- MY 2011 & older - MY 2008 & older - MY 2004 & older
All vehicles not All vehicles not All vehicles not
currently under recall | currently under recall | currently under recall
containing non- containing non- containing non-

December 31, 2016 desiccated frontal desiccated frontal desiccated frontal
Takata PSAN inflators | Takata PSAN inflators | Takata PSAN inflators
— MY 2012 & older — MY 2009 & older — MY 2008 & older
All vehicles not All vehicles not All vehicles not

currently under recall

containing non- containing non- containing non-
December 31, 2017 desiccated frontal desiccated frontal desiccated frontal
Takata PSAN inflators | Takata PSAN inflators | Takata PSAN inflators
- MY 2013 & older - MY 2010 & older - MY 2009 & older
All remaining vehicles | All remaining vehicles ; All remaining vehicles
not currently under not currently under not currently under
December 31, 2018 recall containing non- | recall containing non- | recall containing non-
> desiccated frontal desiccated frontal desiccated frontal
Takata PSAN inflators | Takata PSAN inflators | Takata PSAN inflators
All like for like non- | All like for like non- | All like for like non-
desiccated frontal desiccated frontal desiccated frontal
Takata PSAN Takata PSAN Takata PSAN
December 31, 2019 | replacement parts replacement parts teplacement parts

15.

The length of time required for the propellant to degrade to the point where the

inflator may become unreasonably dangerous and therefore defective is, in some cases

(especially for Zone C), understood to be quite long, and not all non-desiccated frontal Takata

PSAN inflators will have reached the point where they pose an unreasonable risk to safety before

December 31, 2019. Nevertheless, out of an abundance of caution, and in light of the significant

challenges the automotive industry faces in remedy completion efforts as vehicles age, the


(DIRs) to address the potential for future safety issues that may arise specifically from
environmental exposure of vehicles in the United States. Subject to the terms of this amendment,
Takata will not object to the issuance of this order and will comply with the terms contained
herein.

14, To mitigate and control the risk of serious injury or death due to an air bag
inflator rupture, and in light of the significant population of vehicles containing non-desiccated
frontal Takata PSAN inflators not yet under recall, as well as the Agency’s conclusions
regarding root cause and the length of time required for the propellant to degrade to the point
where the inflator may become unreasonably dangerous, the Agency concludes there is a
reasonable and appropriate basis to require Takata to submit DIRs on a rolling basis, as set forth

in the following schedule:


right to present further evidence to NHTSA related to the schedule of DIRs set forth in Paragraph
14 above.
IV. TESTING

19. Paragraph 27 of the November 3, 2015 Consent Order is hereby amended to
relieve Takata from its obligation to continue testing of non-desiccated frontal Takata PSAN
inflators, except as may be specifically requested by NHTSA on an ad hoc basis. Takata shall
continue its efforts to test non-desiccated side inflators.

20. As soon as possible, Takata shall shift its testing focus to desiccated Takata PSAN
inflators in accordance with Paragraph 28 of the November 3, 2015 Consent Order. To that end,
Takata shall provide a testing plan to NHTSA no later than sixty days from the date of this
Amendment.

Vv. MISCELLANEOUS

21. For purposes of clarity, Paragraph 42 of the November 3, 2015 Consent Order is
hereby amended as follows:

42. Reports to NHTSA.

(a) The Monitor shall keep records of his activities, including copies
of all correspondence and telephone logs, as well as records relating to actions
taken in response to correspondence or telephone calls. If potentially illegal or
unethical conduct is reported to the Monitor, the Monitor may, at his option,
conduct an investigation, and/or refer the matter to NHTSA and/or the U.S.
Department of Justice.

(b) The Monitor may report to NHTSA whenever requested or

appropriate but, in any event, shall file written reports not less often than every


UNITED STATES DEPARTMENT OF TRANSPORTATION
NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION
1200 New Jersey Avenue SE
Washington, D.C. 20590

In re:

EA15-001
Air Bag Inflator Rupture

AMENDMENT TO NOVEMBER 3, 2015 CONSENT ORDER

This Amendment to the November 3, 2015 Consent Order (the “Amendment”) is issued
pursuant to the authority of the National Highway Traffic Safety Administration (“NHTSA”), an
operating administration of the U.S. Department of Transportation, to resolve issues raised in the
above-captioned investigation, to mitigate and control risks of harm, and to promote public
safety. This Amendment is entered by the parties under Paragraph 49 of the November 3, 2015
Consent Order between NHTSA and TK Holdings Inc. (“Takata”), for the purpose of amending
the terms of that Consent Order. This Amendment sets forth additional requirements and
performance obligations of Takata in connection with its prior agreement to initiate recalls
relating to air bag inflators in which confirmed field or testing ruptures have occurred and to
fulfill the requirements of the National Traffic and Motor Vehicle Safety Act of 1966, as
amended and recodified (the “Safety Act”), 49 U.S.C. § 30101, et seq., and applicable
regulations thereunder.

Unless otherwise expressly modified herein, the terms and conditions of the May 18,
2015 and November 3, 2015 Consent Orders, issued by NHTSA in this matter and agreed to by

Takata, remain in full force and effect.


AGREED:

TK HOLDINGS INC.

Dated: May 3, 2016 By: _{7 | __———_

. aed
Kevin M. Kennedy
President

Dated: May 3. 2016 By:

Eric J. Laptook ¢
General Counsel. Chief Safety Officer &
Chief Compliance Officer

Dated: May __. 2016 By:

Andrew J. Levander

Dechert LLP

Counsel for TK Holdings Inc.
Approved as to Form


APPROVED AND SO ORDERED:

Dated: May f 2016

Dated: May 4, 2016

Dated: May #, 2016

Dated: May 4, 2016

Dated: May , 2016

NATIONAL HIGHWAY TRAFFIC SAFETY
ADMINISTRATION,

U.S. DEPARTMENT OF TRANSPORTATION

By: /LORIGINAL SIGNED BY //

Mark R. Rosekind, Ph.D.
Administrator

we

Paul A. Hemuerstpugh

~ LLM

Elizabeth AeA Ty]

Senior Trial Attorney

Sy.

Kara L. kn
Trial Attorney

Arija M. Flowers
Trial Attorney

11


Agency has concluded that all vehicles containing non-desiccated frontal Takata PSAN inflators
should be under recall by December 31, 2019.

16. The filing of DIRs by Takata will trigger the vehicle manufacturers’ obligations to
file DIRs and conduct recalls under 49 C.F.R. Part 573, and as set forth in Paragraph 46 of the
November 3, 2015 Coordinated Remedy Order. In accordance with Paragraph 45 of that
Coordinated Remedy Order, the vehicles covered by such DIRs will become part of the
Coordinated Remedy Program, and the remedy of such vehicles will be completed in accordance
with priority schedules established through the Coordinated Remedy Program. In prioritizing the
remedy for vehicles subject to the recalls described in Paragraph 14, the Coordinated Remedy.
Program will consider the estimated service lives of the inflators at issue and variations in
service life demonstrated among different vehicle makes and models.

17. Based on the presentation of additional test data, analysis, or other relevant and
appropriate evidence, by Takata, an automobile manufacturer, or any other credible source,
NHTSA may, after consultation with Takata, alter the schedule set forth in Paragraph 14 to
modify or amend a DIR or to defer certain inflator types or vehicles, or a portion thereof, to a
later DIR filing date. Any such evidence must be submitted to NHTSA no later than one-
hundred-twenty (120) days before the relevant DIR filing date. This paragraph applies only to
the DIRs scheduled to be issued on or after December 31, 2016 under the schedule established
by Paragraph 14 of this Amendment.

18. | NHTSA reserves the right to accelerate or otherwise revise the deadlines in
Paragraph 14 above, if NHTSA determines such alteration is necessary to mitigate an
unreasonable risk to safety within the meaning of the Safety Act, based on the occurrence of

future field ruptures, testing, or other changed facts or circumstances. Takata also reserves its


identified as the high absolute humidity (“HAH”) region‘ plus the states of California and

South Carolina.

b. Zone B comprises states with moderate temperature cycling and absolute
humidity. It includes the following states: Arizona, Arkansas, Delaware, District of
Columbia, Illinois, Indiana, Kansas, Kentucky, Maryland, Missouri, Nebraska, Nevada,
New Jersey, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee,
Virginia, and West Virginia.

ce. Zone C comprises states with lower temperature cycling and absolute
humidity. It includes the following states: Alaska, Colorado, Connecticut, Idaho, Iowa,
Maine, Massachusetts, Michigan, Minnesota, Montana, New Hampshire, New York,
North Dakota, Oregon, Rhode Island, South Dakota, Utah, Vermont, Washington,
Wisconsin, and Wyoming.

8. As a general matter, the expert testing and analysis indicate that the service life
expectancies of non-desiccated frontal Takata PSAN inflators will vary in each of the three
geographic zones described above. Based on this analysis, NHTSA estimates that the service life
expectancies of these inflators range from 6 to 25 years, depending on environmental exposure,
among other factors. See Exhibit A at ] 32. The Agency has concluded that these non-desiccated
frontal Takata PSAN air bag inflators do not pose an unreasonable risk to safety under the Safety
Act until they reach a certain level of propellant degradation.

9. The Agency’s assessments regarding root cause and rates of propellant

degradation are supported by the opinions in Dr. Blomquist’s report. See Exhibit A.

4 The previously defined HAH region includes the following states and territories: Alabama, Florida,

Georgia, Hawaii, Louisiana, Mississippi, Texas, Puerto Rico, American Samoa, Guam, the Northern Mariana
Islands (Saipan), and the U.S. Virgin Islands. See Coordinated Remedy Order at { 38 n.8 (Nov. 3, 2015).


conducted by Takata. See Exhibit A. Most of the expert analysis has focused on non-desiccated
passenger Takata PSAN inflators.

5. Based upon this review, the Agency has concluded that the likely root cause of
the rupturing of most non-desiccated frontal Takata air bag inflators is a function of time,
temperature cycling, and environmental moisture.

6. The purpose of the present amendment is to address the potential for safety risks
to develop in non-desiccated frontal Takata PSAN inflators that have not previously been subject
to recalls in the United States. The Agency has concluded that the rate at which propellant
degradation may occur in non-desiccated frontal Takata air bag inflators varies based upon
geographic factors of environmental heat and humidity. Based upon its own testing and analysis,
Takata further believes that the potential for propellant degradation and the expected rate of
degradation will also vary considerably depending on the type of inflator at issue and the specific
vehicle makes and models in which the inflators are installed. The safety and service life of the
non-desiccated frontal Takata PSAN inflators may also be affected by manufacturing
variability.>

7. Considering the critical factors of temperature and absolute humidity, the United
States can generally be divided into the following three zones:

a. Zone A comprises the states and U.S. territories with the greatest

temperature cycling and absolute humidity. These are the states and territories previously

3 There are several makes and models of vehicles equipped with non-desiccated frontal Takata PSAN inflators in
which to date there have been no reported inflator ruptures associated with long-term degradation of PSAN
propellant.


I FINDINGS AND BASIS FOR AMENDMENT

1. Three independent research organizations have undertaken scientific evaluations
of non-desiccated frontal Takata air bag inflators, containing a phase-stabilized ammonium
nitrate-based propellant (“PSAN”) (collectively, the “non-desiccated frontal Takata PSAN
inflators”), that may rupture during air bag deployment (the “third-party evaluations”). See
Expert Report of Harold R. Blomquist, Ph.D. at Jj 13-15 (attached hereto as Exhibit A). Such
ruptures have, in some instances, resulted in death or serious injury to vehicle occupants.'

2. NHTSA has been briefed on the third-party evaluations and the conclusions
drawn by the three research organizations regarding root cause. The findings of all three research
organizations are consistent with previous theories that most of the inflator ruptures are
associated with a long-term phenomenon of PSAN propellant degradation caused by years of
exposure to temperature fluctuations and intrusion of moisture present in the ambient
atmosphere.” See Exhibit A at { 17. The temperature fluctuations and moisture intrusion are more
severe in warmer climates with high absolute humidity. See Exhibit A at § 18.a.

3. The Agency has reviewed determinations experts have made regarding the rate of
climate-induced propellant degradation in non-desiccated frontal Takata PSAN inflators — i.e.,
the amount of time and exposure to heat cycling and humidity before the inflator propellant may
show signs of degradation associated with the risk of rupture. See Exhibit A at {J 28-29.

4. In consultation with its expert, Harold R. Blomquist, Ph.D., the Agency has
thoroughly reviewed the work of these three research organizations, as well as the results of

ballistic testing and other testing and analysis to predict the service life of PSAN inflators

' No field ruptures have yet been reported involving those non-desiccated frontal PSAN inflators not already

subject to recalls in the U.S.

2 A limited number of the Takata inflator ruptures have been due to identified manufacturing issues, rather

than the propellant degradation process analyzed and identified in the third-party evaluations.


AGREED:

Dated: May __, 2016

Dated: May __, 2016

Dated: May 2, 2016

TK HOLDINGS INC.

By:

Kevin M. Kennedy
President

By:

Eric J. Laptook
General Counsel, Chief Safety Officer &
Chief Compliance Officer

By: O<? ——

Andrew J, Levander

Dechert LLP

Counsel for TK Holdings Inc.
Approved as to Form

12