Economy

Takata, brought down by airbag crisis, files for bankruptcy

Takata, brought down by airbag crisis, files for bankruptcy

After being the focus of the automotive industry's largest ever product recall, Japanese part maker Takata has filed for bankruptcy in both Japan and the US.

In the biggest bankruptcy of a Japanese producer, Takata deals with 10s of billions of dollars in expenses and liabilities arising from almost 10 years of recalls and lawsuits. The company said the move was necessary to ensure it could carry on supplying replacements for faulty air bag inflators linked to the deaths of at least 16 people.

Takata Americas, its USA arm, filed for Chapter 11 bankruptcy in DE on Sunday with liabilities of US$10 billion to US$50 billion, while the Japanese parent and subsidiaries filed for protection with the Tokyo District Court early on Monday.

Honda, which accounts for roughly half of the affected vehicles worldwide, has already booked charges amounting to 556 billion yen ($5 billion) for its air bag recalls.

Takata's total liabilities stand at 1.7 trillion yen (US$15 billion), Tokyo Shoko Research Ltd estimated. Key Safety Systems, which is owned by a company in China, Ningbo Joyson Electronic Corporation, has sought to wall itself off from Takata's legal problems by buying Takata's assets, but not the company itself.

That's the problem with Takata's inflators: the ammonium nitrate can become unstable and explode with excessive force when airbags are deployed.

The faulty airbags were produced between 2000 and 2008 but the scandal did not break until 2014, after the New York Times accused Takata of sweeping security concerns under the carpet. The company has held in-depth discussions with Takata's major OEM customers and has jointly developed a transaction structure and operating plan to facilitate ongoing supply of Takata parts.

Japanese airbag maker Takata has filed for bankruptcy protection in Japan and the US.

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About two-thirds of 46.2 million recalled Takata inflators in the United States have not been fixed. Industry sources say Takata would be able to complete the current global recall under bankruptcy, but could face problems if further recalls are required down the line.

The CEO of Takata, who has long pushed back the scenario of bankruptcy, refused to let go the reins, officially welcomed the choice of KSS, "an ideal takeover".

The majority of Takata's assets will be bought for about $1.6 billion by Key Safety Systems, a Chinese-owned company based in Detroit. Worldwide, 100 million inflators have been recalled, 69 million of them in the USA, affecting 42 million vehicles by 19 different automakers, according to the wire service. Automakers may have to cover any shortfall, he said.

The company's chairman and CEO Shigehisa Takada - who's the grandson of the founder - has been criticised repeatedly for mishandling the crisis.

But it said this would have a minimal impact on its earnings, as the money has already been set aside.

Ford isn't disclosing the cost of its Takata air bag repairs, saying it included the estimates in its overall financial outlook.

Takata had taken a major step in reaching a settlement with the USA authorities earlier this year: accused of concealing the problem for years, pleaded guilty and pledged a fine of $ 1 billion In order to escape a criminal trial. It started producing airbags in 1987, becoming the world's second producer of the safety products.

The bankruptcy filings by Takata, founded in 1933 as a textiles maker, led the Tokyo Stock Exchange to announce Monday it was delisting the company.


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