US Key Safety Systems set to take over bankrupt Takata
JAPAN’S Takata Corporation, 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 would be bought for $1.6 billion (R20.63bn) by US-based Key Safety Systems (KSS).
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 airbags have been linked to at least 17 deaths around the world.
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 yesterday.
Takata’s total liabilities stand at ¥1.7 trillionn (R196.84bn), 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 KSS, a Michigan-based parts supplier owned by China’s Ningbo Joyson Electronic Corporation.
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 chief executive Shigehisa Takada said.
Takada said he and top management would resign “when the timing of the restructuring is set.” His family – which still has control of the 84-year-old company – likely would cease to be shareholders.
Jason Luo, president and chief executive of KSS, said that the “underlying strength” of Takata’s business had not diminished despite the airbag recall, citing its skilled employee base, geographic reach and other safety products such as seat belts.
The companies expect to seal definitive agreements for the sale in coming weeks and complete the twin bankruptcy processes in the first quarter of 2018.
The filings have, however, not resolved all issues. Honda Motor Company, Takata’s biggest customer, said it had reached no final agreement with Takata on responsibilities for the recall.
Honda said it would continue talks with the supplier, but anticipated difficulties in recovering the bulk of its claims.
Takata faces billions in lawsuits and recall-related costs to its clients, including Honda, BMW, Toyota Motor Corporation and others which have been paying recall costs to date.
It also faces potential liabilities stemming from class action lawsuits in the US, Canada and other countries.
Global transport authorities have ordered about 100 million inflators to be recalled.
Industry sources have said that recall costs could climb to about $10bn.
The ammonium nitrate compound used in the airbags was found to become volatile with age and prolonged exposure to heat, causing the devices to explode.
Costs so far have pushed the company into the red for three years, and it has been forced to sell subsidiaries to pay fines and other liabilities.
Founded as a textiles company in 1933, Takata began producing airbags in 1987 and at its peak became the world’s No 2 producer of the safety products.
It also produces one-third of all seatbelts used in vehicles sold globally, along with other components.
The Tokyo Stock Exchange said its shares would be delisted on July 27.
The stock has collapsed 95 percent since January 2014 as the recalls mounted. – Reuters
Takata faces billions in lawsuits and recall-related costs to its clients.