Air bag maker Takata files for bankruptcy

TOKYO/WASHINGTON: Japan’s Takata Corp., the firm at the center of the auto industry’s biggestever product recall, filed for bankruptcy protection in the US and Japan, and said it had agreed to be largely acquired for $1.6 billion by the Chinese-owned US-based Key Safety Systems.

In the biggest bankruptcy of a Japanese manufacturer, Takata faces tens of billions of dollars in costs and liabilities resulting from almost a decade of recalls and lawsuits. Its airbag inflators have been linked to at least 16 deaths and 180 injuries around the world because they can rupture and send metal fragments flying.

TK Holdings, its US operations, filed Chapter 11 bankruptcy in Delaware on Sunday with liabilities of $10 billion to $50 billion, while the Japanese parent filed for protection with the Tokyo District Court early on Monday.

Scott Caudill, chief operating officer of TK Holdings, said in a court affidavit that the company “faces insurmountable claims” relating to the recalls and owes billions of dollars to automakers. He disclosed that Takata has recalled, or expects to recall, by 2019 about 125 million vehicles worldwide, including more than 60 million in the US.

Takata’s total liabilities stand at 1.7 trillion yen ($15 billion), Tokyo Shoko Research Ltd. estimated.

Final liabilities would depend on the outcome of discussions with carmaker customers who have borne the bulk of the replacement costs, a lawyer for the company said.

The filings open the door to the financial rescue by Key Safety Systems (KSS), a Michigan-based parts supplier owned by China’s Ningbo Joyson Electronic Corp.

In a deal that took 16 months to hammer out, KSS agreed to take over Takata’s viable operations, while the remaining operations will be reorganized to continue churning out millions of replacement air bag inflators, the two firms said.

The US company would keep “substantially all” of Takata's 60,000 employees in 23 countries and maintain its factories in Japan. The agreement is meant to allow Takata to continue operating without interruptions and with minimal disruptions to its supply chain.

“We believe taking these actions in Japan and the US is the best way to address the ongoing costs and liabilities of the air bag inflator issues with certainty and in an organized manner,” Takata CEO Shigehisa Takada said in a statement.

The remainder of Takata assets will be reorganized to produce replacement inflators, but it is not clear how long they will operate. Takata said it does not expect to continue operating a plant in Germany after the restructuring is completed.

The company’s CEO said he and the top management would resign “when the timing of the restructuring is set.” His family — which still has control of the 84-year-old company —would likely cease to be shareholders.