Takata seeks bankruptcy protection

Air bag manufacturer files in U.S. and Japan

UNDATED—Japanese air bag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of faulty air bag inflators that are linked to the death of at least 16 people.

The company announced the expected action this morning, Tokyo time. Takata confirmed that most of its assets will be bought by rival Key Safety Systems, based in suburban Detroit. Key will pay about $1.6 billion (175 billion yen), according to an announcement by the two companies.

Takata’s defective inflators can explode with too much force when they fill up an air bag, spewing out shrapnel. Besides the fatalities, they’re also responsible for at least 180 injuries, and touched off the largest automotive recall in U.S. history. So far 100 million inflators have been recalled worldwide including 69 million in the U.S., affecting 42 million vehicles.

Under the agreement with Key, Takata’s manufacturing of inflators will be kept separate in order to keep manufacturing inflators used as replacement parts in recalls. The recalls, which are being handled by 19 affected automakers, will continue.

Key also said it won’t cut any Takata jobs or close any of Takata’s facilities.

At the end of April, only 22 percent of the 69 million recalled inflators in the U.S. had been replaced under the recalls, leaving almost 54 million on the roads, according to the National Highway Traffic Safety Administration website. This means more inflators will likely explode and more people will be hurt in the future, 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.

Key, a Chinese company with international operations, makes inflators, seat belts and crash sensors for the auto industry. It is owned by China’s Ningbo Joyson Electronic Corp. Its global headquarters and U.S. technical center is in Sterling Heights, Michigan.

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. Of that amount, $850 million goes to automakers to cover their costs of the recalls. Takata already has paid $125 million into a fund for victims and a $25 million fine to the U.S. Justice Department.

Attorneys for those injured by the inflators worry that $125 million won’t be enough to fairly compensate victims.