Crisis has Takata filing for bankruptcy
Takata Corp. filed for bankruptcy protection in the biggest postwar Japanese corporate failure in the manufacturing industry, as the 84-year-old company buckled under liabilities from millions of recalled airbags that have been linked to more than a dozen deaths.
The Tokyo-based company and its units filed for creditor protection in the U.S. and Japan. The Chapter 11 bankruptcy in Delaware listed more than $10 billion in liabilities, including claims from automakers including Honda Motor Co. — the biggest user of the airbags — and Toyota Motor Corp. as well as individuals who have brought class-action lawsuits.
The filing is the culmination of a saga that began with a recall more than eight years ago but has spiralled as the company’s malfunctioning airbag inflators — which sent shards of metal at drivers and passengers — have been blamed for at least 17 deaths worldwide. It also removes the final hurdle for the supplier to be acquired by Key Safety Systems Inc., a unit of China’s Ningbo Joyson Electronic Corp., for ¥175 billion ($1.6 billion US).
“We were facing a severe situation and we weren’t able to wait any longer,” Takata chair and chief executive Shigehisa Takada told a briefing in Tokyo on Monday. The 51-year-old will step down after handing over the company to its new management.
The sale to Key Safety and the bankruptcy proceedings are expected to be completed by the first quarter of next year, Takata said in a statement. Key Safety will substantially retain all of Takata’s employees worldwide. The airbag maker had 50,530 people as of March 2016, according to data compiled by Bloomberg News.
Seventeen carmakers, including BMW and Tesla, were listed as unsecured creditors with unknown claims related to recalls and indemnification, according to the filing. Litigation claims included those from class action plaintiffs in the U.S. and Canada, and the attorney general of the U.S. Virgin Islands. The National Highway Traffic Safety Administration has a $180-million US claim for fines and penalties.
Takata is unable to disclose the total of its liabilities as the company hasn’t reached an agreement on how to split the recall costs with the automakers, Nobuaki Kobayashi, a member of Takata’s steering committee, said at the news conference.
Key Safety’s purchase will exclude the assets and operations related to Takata’s manufacturing and sale of ammonium nitrate airbag inflators, according to the company. The chemical is at the heart of the recall crisis, degrading over time under conditions of heat and humidity and resulting in uncontrolled explosions that ruptured airbag parts.
The inflator operations are expected to be run by a reorganized Takata following the transaction closing and eventually will be wound down, the companies said.
When an airbag exploded in a Honda Accord in 2004, Takata called it an anomaly. Since then, regulators have expanded the recall more than 20 times to include millions of bags in more than a dozen automakers’ vehicles. The recalls — expected to cover more than 100 million airbags — and accidents spurred the filing of multiple lawsuits against Takata and the car companies using the airbags. They alleged personal injuries or deaths or economic losses. Takata’s liabilities would total about ¥1.7 trillion if recall costs were included, according to Tokyo Shoko Research.
In January, Takata admitted to hiding the deadly risks of its exploding airbags for about 15 years in an agreement to pay $1 billion to U.S. regulators, consumers and carmakers. The settlement included a $25million criminal fine, $125 million in victim compensation and $850 million to compensate automakers who have suffered losses from massive recalls.
Takata also reached settlements with some carmakers worth $553 million to resolve economic-loss claims tied to the company’s faulty products. Toyota, Subaru, Mazda and BMW will reimburse out-ofpocket expenses, provide loaners to some vehicle owners and set up an outreach program to increase participation in recalls, according to court papers filed May 18. Under the accords, any funds left over will be paid, up to $500 each, to vehicle owners or lessees. The settlement covers 15.8 million vehicles but doesn’t cover claims over personal injuries or deaths.
In the U.S., about 43 million airbag inflators are subject to recall, and about 38 per cent have been repaired as of May 26, according to data on the U.S. Department of Transportation’s National Highway Traffic Safety Administration’s website. In Japan, the recall affects close to 19 million vehicles and is 73 per cent complete, a spokesperson at the country’s transport ministry said.