Takata files for bankruptcy, gets US sponsor
tokyo — Japan’s Takata Corp, the firm at the centre of the auto industry’s biggest ever product recall, filed for bankruptcy protection in the United States and Japan, and said it would be bought for $1.6 billion by US-based rival Key Safety Systems.
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 defective airbag inflators have been linked to at least 17 deaths around the world. Takata Americas, its US arm, filed for Chapter 11 bankruptcy in Delaware on Sunday with liabilities of $10 billion to $50 billion, while the Japanese parent and subsidiaries filed for protection with the Tokyo District Court early on Monday.
Takata’s total liabilities stand at ¥1.7 trillion ($15 billion), Tokyo Shoko Research Ltd estimated.
Final liabilities would depend on the outcome of discussions with carmaker 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 Key Safety Systems (KSS), a Michigan-based parts supplier owned by China’s Ningbo Joyson Electronic Corp.
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. Takata will also receive a $227 million lifeline from its main lender, Sumitomo Mitsui Banking Corporation, in the form a debtor-in-possession financing.
KSS would keep “substantially all” of Takata’s 60,000 employees in 23 countries and maintain its factories in Japan. The deal 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 CEO Shigehisa Takada said in a statement. Takada said he and top management would resign “when the
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 Shigehisa Takada, CEO, Takata
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 CEO of KSS, said in a statement 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, as Takata still needs to reach agreements with its carmaker clients on how to divvy up recall costs. Honda Motor Co, once Takata’s biggest customer, said it had reached no final agreement on responsibilities for the recall. Like other Japanese automakers, Honda said it anticipated difficulties in recovering the bulk of its claims.