Air bag maker Takata files for bankruptcy in Japan, US

Joanna Estrada
June 26, 2017

Japan's Takata Corp, the firm at the centre of the auto industry's biggest ever product recall, filed for bankruptcy protection in the United States and Japan, and said it would be bought for $1.6 billion by US-based Key Safety Systems.

The U.S. business of embattled Takata Corp. filed for Chapter 11 protection in DE late Sunday, with the parent company following suit in Tokyo Monday morning.

American vehicle parts maker Key Safety Systems (KSS) will take over Takata which will sell its assets and businesses to KSS for an estimated $1.6 billion.

Takata was done in by defective air bag inflators that can explode with too much force, spewing out shrapnel. They're responsible for at least 16 deaths and 180 injuries and touched off the largest automotive recall in US history.

In the biggest bankruptcy of a Japanese manufacturer, Takata faces tens of billions of dollars in costs and liabilities resulting from nearly a decade of recalls and lawsuits.

"KSS is the ideal sponsor as we address the costs related to airbag inflator".

Takata's major automaker clients reportedly support the bankruptcy filing plan.

A billboard advertisement of Takata Corp is pictured in Tokyo September 17, 2014.

"Because we know particularly in the case of USA court system, you don't always have a very good picture of what kind of liability could result from judgments there", she said.

Late 1990s - Takata starts developing airbags with ammonium nitrate-based propellant in the inflators.

February 27, 2017: Takata pleads guilty to criminal charges in a USA court, agreeing to pay $1 billion in penalties, and its chief financial officer says that the company's conduct has been "deeply inappropriate". Takata has already paid $125m into a fund for victims and $25m to the US Justice Department.

Attorneys for those injured by the inflators worry that $125 million won't be enough to fairly compensate victims, many of whom have serious facial injuries from metal shrapnel. "One gentleman cannot smile anymore". Automakers sought a court-led turnaround. Settlement agreements with Toyota, Subaru, BMW and Mazda already have won preliminary court approvals, said the attorney, Peter Prieto.

"The fact that they appear to have reached an agreement to sell the assets to KSS should enable this to continue", she said.

Fallout from the bankruptcy filing came swiftly from the Tokyo Stock Exchange, which said it was stopping the company, founded in 1933, from trading from Tuesday.

Key, a Chinese company with worldwide operations, makes inflators, seat belts and crash sensors for the auto industry. Its global headquarters and USA technical center is in Sterling Heights, Michigan.

U.S. based Key Safety Systems (KSS) has bought all of Takata's assets, aside from those relating to the airbags.

May - NHTSA says Takata admits some inflators faulty.

The scandal has hammered Takata's once-thriving brand and put it in a tight spot as it faces probes, lawsuits and massive liabilities, estimated to exceed one trillion yen. "Takata was not going to recover sufficiently to pay them back". It's not clear yet where the rest of the $1.6 billion will go.

November - Takata agrees to halt new contracts for ammonium-nitrate inflators in the United States, phase out manufacture and sale of such inflators without desiccant. According to Reuters sources, the new company would stop using the Takata brand, and have air bags, seatbelts and other components rebranded as KSS products.

Nissan Motor Co., Japan's No.2 automaker, issued a statement saying it would also have trouble claiming reimbursement for its recall costs.

Almost 100 million cars, including about 70 million in the United States, were subject to the recall.

The process could take years.

That varies by model, age of the vehicle and manufacturer. Without parts, dealers can't perform the recalls and it is illegal for service centers to disable airbags. Honda will continue to replace recalled inflators, despite the bankruptcy, he said.

2008: Honda recalls 3,940 Accords and Civics from 2001 model year.

Honda no longer uses Takata inflators in newly-built vehicles. Other manufacturers are also supplying replacement air bags. Immediate confirmation was not available.

Other reports by Click Lancashire

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