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