Japanese airbag maker Takata Corp filed for bankruptcy protection at the Tokyo District Court early on Monday, as the company continues to deal with the fallout from the automotive industry’s biggest ever product recall.
Takata faces tens of billions of dollars in costs and liabilities resulting from defective air bags, which can explode upon deployment, launching shrapnel at drivers and passengers. The defect has been linked to at least 17 deaths and more than 180 injuries around the world.
The U.S. arm of the company also filed for Chapter 11 bankruptcy in Delaware on Sunday. This has opened the door for a $1.6 billion takeover by competitor Key Safety Systems, which is based in Detroit but owned by China's Ningbo Joyson Electronic Corp. Takata will also receive a $227 million lifeline from its main lender, Sumitomo Mitsui Banking Corporation.
"At a board meeting on June 26, our company decided to begin procedures in filing for bankruptcy protection," Takata CEO 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.”
KSS has agreed to take over Takata's viable operations, while the remaining operations will be reorganized. The American company said it would keep "substantially all" of Takata's 60,000 employees in 23 countries and maintain its factories in Japan.
"Although Takata has been impacted by the global airbag recall, the underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat belts and other safety products have not diminished," Jason Luo, President and CEO of KSS, said in a statement.
"We look forward to finalising definitive agreements with Takata in the coming weeks, completing the transaction and serving both our new and long-standing customers while investing in the next phase of growth for the new KSS."
Takata faces billions in lawsuits and recall-related costs to its clients, including Honda, BMW and Toyota, which have been paying recall costs to date. In February, BMW were forced to recall another 230,000 vehicles in the United States that may have been fitted with faulty airbags. An estimated 100 million inflators have been recalled worldwide, which includes 69 million in the United States, affecting around 42 million vehicles.
The companies plan to use at least $1 billion from the sale for Takata’s settlement in the United States for concealing problems with the inflators. Of that amount, $850 million goes to automakers to help cover their costs from the recalls.
Stay up-to-date with the latest trending news stories and industry advances with the Research and Markets blog. Don’t forget to connect with us on LinkedIn and Twitter for the latest blog plus information about new products.