Published: Tue, June 27, 2017
Life&Culture | By Rose Hansen

Takata files bankruptcy: What does this mean?

Takata files bankruptcy: What does this mean?

Takata Corp. filed for bankruptcy protection in the USA and Japan on Sunday. At least 16 deaths worldwide and more than 180 injuries are blamed on the inflators.

Its operations in the U.S., TK Holdings on Sunday filed Chapter 11 listing its liabilities of between $10 billion and $50 billion, while its parent in Japan filed on Monday in Tokyo. But the cost of the fallout could run as high as $15 billion, according to an estimate by analysts from Tokyo Shoko Research.

Takata's bankruptcy filing clears the way for most of its assets to be taken over by Key Safety Systems, a Chinese-owned company based in suburban Detroit.

The inflator recall, which is being done in phases to prioritize the riskiest vehicles, affects 46 million driver- and front passenger-side inflators in 29 million vehicles in the US after a massive expansion past year.

"We believe taking these actions in Japan and the USA is the best way to address the ongoing costs and liabilities of the airbag inflator issues with certainty and in an organized manner", Takata chief executive officer Shigehisa Takada said in a statement.

"We believe taking these actions in Japan and the U.S.is the best way to address the ongoing costs and liabilities of the airbag inflator issues with certainty and in an organized manner while ensuring that Takata's operations worldwide continue in the ordinary course and without interruption", Shigehisa Takada, Takata chairman and CEO, said in a statement. His family, which holds control of the company that opened over 8 decades ago, will likely no longer be shareholders. This includes its business for manufacturing steering wheels, seat belts and other safety products, but not its air bags. The 175 billion yen price tag - which will go in part to a compensation fund for those automakers, per an agreement with the U.S. Department of Justice - is little more than a tenth of that sum. Now, they spend more time and money figuring out how to pay for a massive recall that affected tens of millions of defective air-bag inflators over the past several years.

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Takata in February pleaded in a US federal court to a felony charge as part of a $1-billion settlement that included compensation funds for automakers and victims of its faulty airbag inflators.

The companies expect to seal definitive agreements for the sale in the coming weeks and complete the twin bankruptcy processes in the first quarter of next year.

"We are following NHTSA's coordinated remedy to phase in vehicles by model, model years, and regions, over the next few years", a Ford spokesperson said.

Takata faces billions in lawsuits and recall-related costs to its clients, including Honda, BMW, Toyota Motor Corp and others, which have been paying recall costs to date. But Wehner says Key Safety's acquisition of Takata will stabilize the airbag industry, an outcome that should reassure automakers.

The embattled company has manufactured airbags for more than 30 automotive brands including Honda, BMW, Toyota, Mazda and Mitsubishi, with replacement parts hard to source due to the huge scale of the recall. The stock has collapsed 95 percent since January 2014.

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