Takata seeks bank­ruptcy

Maker of faulty air bag in­fla­tors says fil­ing is only way to keep re­place­ments com­ing.

Los Angeles Times - - TECHNOLOGY -

Shat­tered by re­call costs and law­suits, Ja­panese air bag maker Takata Corp. filed for bank­ruptcy pro­tec­tion Mon­day in Tokyo and the U.S., say­ing that was the only way it could keep on sup­ply­ing re­place­ments for faulty air bag inf la­tors linked to the deaths of at least 16 peo­ple.

The com­pany’s bank­ruptcy fil­ings cleared the way for a $1.6-bil­lion takeover of most of Takata’s as­sets by ri­val Key Safety Sys­tems, which is based in De­troit but owned by a Chi­nese com­pany.

Takata’s in­fla­tors can ex­plode with too much force when they fill up an air bag, spew­ing out shrap­nel. Apart from the fa­tal­i­ties, they’re re­spon­si­ble for at least 180 in­juries world­wide.

World­wide, 100 mil­lion in­fla­tors have been re­called, in­clud­ing 69 mil­lion in the U.S., af­fect­ing 42 mil­lion ve­hi­cles. It is the largest au­to­mo­tive-re­lated re­call in U.S. his­tory.

Takata’s pres­i­dent, Shige­hisa Takada, told re­porters in Tokyo that with the com­pany rapidly los­ing value, fil­ing for bank­ruptcy pro­tec­tion was the only way it could carry on.

“We’re in a very dif­fi­cult sit­u­a­tion, and we had to find ways to keep sup­ply­ing our prod­ucts,” Takada said. “As a maker of safety parts for the au­to­mo­bile in­dus­try, our fail­ure to main­tain a sta­ble sup­ply would have a ma­jor im­pact across the in­dus­try.”

“There was no other way,” he said.

Takada said he in­tends to leave Takata’s man­age­ment once it is handed over to Key Safety Sys­tems and things are run­ning smoothly.

“It would be a big nui­sance for the new com­pany if a per­son like me were to get in­volved in its man­age­ment,” he said.

The bank­ruptcy fil­ings by Takata, founded in 1933 as a tex­tiles maker, prompted the Tokyo Stock Ex­change to an­nounce Mon­day that it was delist­ing the com­pany.

Un­der its agree­ment with Key, remnants of Takata’s op­er­a­tions will con­tinue to make in­fla­tors to be used as re­place­ment parts in the re­calls, which are be­ing han­dled by 19 af­fected au­tomak­ers.

Takata will use part of the sale pro­ceeds to re­im­burse the au­tomak­ers, but ex­perts say the com­pa­nies still must fund a sig­nif­i­cant por­tion of the re­calls them­selves.

The process could take years. One of Takata’s lawyers, Nobuaki Kobayashi, said it was too early to es­ti­mate the to­tal even­tual cost of the re­calls and would not con­firm Ja­panese me­dia re­ports that they ex­ceeded $9 bil­lion.

“It’s likely ev­ery au­tomaker in­volved in this re­call will have to sub­si­dize the process be­cause the value of Takata’s as­sets isn’t enough to cover the costs of this re­call,” said Karl Brauer, ex­ec­u­tive pub­lisher of Kel­ley Blue Book and Au­to­trader.

Ja­pan’s Min­istry of Econ­omy, Trade and In­dus­try said Mon­day that it was set­ting up “ad­vice win­dows” to help any af­fected small and medium-size sup­pli­ers that might face dif­fi­cul­ties be­cause of Takata’s trou­bles.

More than 70% of the air bags re­called in Ja­pan have been re­placed, and 36% in the U.S., said Hiroshi Shimizu, a Takata vice pres­i­dent. He said progress of the re­calls in other coun­tries was un­known.

Takata and the au­tomak­ers were slow to ad­dress the prob­lem with the in­fla­tors de­spite re­ports of deaths and in­juries. Even­tu­ally, they were forced to re­call tens of mil­lions of ve­hi­cles. The scope of the re­calls means some car own­ers face lengthy waits for re­place­ment parts.

The prob­lems stem from use of the ex­plo­sive chem­i­cal am­mo­nium ni­trate in the in­fla­tors used 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.

At least $1 bil­lion from the sale to Key is ex­pected to be used to sat­isfy Takata’s set­tle­ment of crim­i­nal charges in the U.S. for con­ceal­ing prob­lems with the in­fla­tors.

Pho­to­graphs by Kazuhiro Nogi AFP/Getty Im­ages

TAKATA rep­re­sen­ta­tives hold a news con­fer­ence Mon­day in Tokyo on the com­pany’s bank­ruptcy fil­ing. The move clears the way for a $1.6-bil­lion takeover of most of Takata’s as­sets by ri­val Key Safety Sys­tems.

SHIGE­HISA TAKADA is pres­i­dent of Takata. The firm’s in­fla­tors have been linked to at least 16 deaths.

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