Airbag maker files for bankruptcy after decades of recalls

Japan’s Takata, the firm at the centre of the car industry’s biggest ever product recall, filed for bankruptcy protection in the US and Japan and said it had agreed to be largely acquired for $1.6bn by the Chinese-owned, US-based Key Safety Systems.

In the biggest bankruptcy of a Japanese manufacturer, Takata faces 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 worldwide 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 $10bn to $50bn, 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 car makers. 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 about ¥1.7-trillion ($15bn), Tokyo Shoko Research estimated.

Final liabilities would depend on the outcome of discussions with car-maker 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 Michiganbased 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 reorganised to continue churning out millions of replacement airbag 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 airbag inflator issues with certainty and in an organised manner,” Takata CEO Shigehisa Takada said in a statement.

The remainder of Takata’s assets will be reorganised to produce replacement inflators.