Air bag victims would lose out in bankruptcy

Takata sale likely would leave little for plaintiffs

DETROIT — A bankruptcy filing by Japanese air bag maker Takata will leave little money for dozens of people who sued the company over deaths and injuries caused by its exploding air bag inflators, according to outside legal experts and lawyers suing the company.

Takata Corp. and its U.S. operations are likely to seek bankruptcy protection by the end of June in a deal that would sell its assets to competitor Key Safety Systems Inc., a person briefed on the talks said.

The price Key will pay is unknown, but much of it likely will go toward paying a $1 billion U.S. criminal settlement. Most of the settlement money will go to automakers as restitution for recall costs.

Key is expected to buy Takata’s assets “free and clear” of past liabilities, and lawyers say there won’t be enough money to give victims what they would have received if they were suing a healthy company.

So far the faulty inflators have killed 11 people in the U.S. and 16 worldwide. The problem touched off the biggest recall in U.S. automotive history, involving 19 automakers, 42 million vehicles and up to 69 million inflators.

Some victims would win large verdicts if Takata were financially strong, lawyers say.

Takata’s troubles stem from use of the explosive chemical ammonium nitrate in the inflators to deploy air bags in a crash. The chemical can deteriorate when exposed to hot and humid air and burn too fast, blowing apart a metal canister and spewing out metal fragments.

In February, Takata pleaded guilty to fraud and agreed to the $1 billion settlement. Lawyers acknowledged in court that the company would have to be sold to fund the settlement. Automakers would get $850 million in restitution for recall costs, and a $25 million fine would be paid to the government. Takata already has paid $125 million into a fund for victims.

“Takata intends to try to use our bankruptcy laws to escape responsibility for the injured and the families of the dead,” said Bradford Child, a Los Angeles lawyer who represents the family of a woman killed by a ruptured inflator.

In a statement last week, Takata maintained the possibility of keeping the company in operation. A committee set up to explore restructuring has made a recommendation with Key as a suitor, but Takata’s board hasn’t decided on it.

If Key pays more than $1 billion for the company, victims could get more. A similar pool set up by General Motors paid out nearly $600 million to settle 399 death and injury claims due to ignition switches that could shut off cars without warning.

Law firms also are suing automakers, but some lawyers say it will be hard to get money there because Takata has admitted that it concealed the problem.

Key is owned by Ningbo Joyson Electronic Corp. of China.