Shares in Takata dive on fears of bankruptcy

TAKATA shares dived 16.5 percent yesterday in response to news reports that the troubled airbag maker plans to file for bankruptcy and sell its assets to a US company.

The stock finished the day at 404 yen ($3.6), tumbling by its maximum daily loss limit on the Tokyo Stock Exchange.

The Nikkei business daily has said the company, with liabilities exceeding 1 trillion yen ($9 billion), would make a formal decision about the bankruptcy filing at a board meeting this month.

Takata, at the centre of the global auto industry’s biggestever safety recall, was suspended from trading on Friday pending a response to the Nikkei story and other similar reports.

Late on Friday Takata said that no decision had been made but “all options” were on the table.

American autoparts maker Key Safety Systems, owned by China’s Ningbo Joyson Electronic, will take over the firm’s operations, the Nikkei’s report on Friday said.

The board of Takata’s USbased unit TK Holdings is expected to approve a filing for Chapter 11 bankruptcy there this month, it added.

The shares went untraded for most of yesterday as the number of sell orders swamped buy orders.

“Once the word is out [about bankruptcy] that will scare the company’s business partners away and it becomes unable to conduct normal business transactions,” speeding up its bankruptcy filing, said Toru Kitani, an analyst at SMBC Friend Securities.

“Given its massive liabilities, there will be no resources left to pay dividends to shareholders. In essence, shareholders’ investment is doomed to become a mere scrap of paper. It’s an extremely risky stock.”

Nearly 100 million cars, including about 70 million in the United States, were subject to the airbag recall, the largest in auto history, over the defective Takata airbags. These have been blamed for 11 deaths in the United States alone.

Last month four automakers including Toyota and BMW agreed to pay $553 million to settle a US lawsuit over the airbags.

The suit filed in late February claimed the carmakers were aware of the dangerous defects and used the airbags in their vehicles anyway. Nearly 16 million cars were involved.

Takata pleaded guilty to fraud in February and agreed to pay a $1 billion penalty to settle the issue with US regulators.

The Friday reports said a new company created under Key Safety would buy Takata’s operations and continue supplying airbags, seat belts and other products.

The downsized Takata would remain responsible for recallrelated liabilities, the Nikkei said.