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Honda (HMC) Agrees on $605 Million Takata Air Bag Settlement

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Honda Motor Co., Ltd. (HMC - Free Report) announced that it has agreed to a $605 million legal settlement over faulty Takata air bag inflators, which caused numerous deaths and injuries, according to a Wall Street Journal report. The loss settlement covers up to 16.5 million Honda and Acura vehicles.

Per the news, the Japanese automaker will have to pay $484 million after receiving $121 million credit, taking into consideration the company’s recall efforts, which included offering rental vehicles to customers who had to wait for repairs. Of the $484 million, Honda will spend around $200 million over four years looking out for the vehicle owners with unrepaired cars and encouraging them to replace the inflators. The remaining amount will be utilized for paying attorney fees and reimbursing owners who had to suffer due to lost wages and had to incur expenses due to hiring rental cars.

Notably, several global automakers had reached similar kind of settlements early this year. The settlement amount was more than $650 million. Takata’s air bags are linked to several deaths and injuries across the globe. Early this year, Takata filed for bankruptcy protection in the United States and Japan, and also agreed to pay $1 billion in penalties.

Year to date, shares of Honda underperformed the industry it belongs to.  During this time period, shares of the company declined 3.3% and the industry lost 1.8%.

Honda currently sports a Zacks Rank #1 (Strong Buy).

A few better-ranked automobile stocks are Toyota Motor Corporation (TM - Free Report) , Volkswagen AG (VLKAY - Free Report) and Daimler AG (DDAIF - Free Report) . While Toyota sports a Zacks Rank #1, both Volkswagen and Daimler carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Toyota has a long-term growth rate of 7%.

Volkswagen has a long-term growth rate of 8.9%.

Daimler has an expected long-term earnings growth rate of 2.8%

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