Published: Mon, June 26, 2017
Markets | By Noel Gibbs

Air bag maker Takata bankruptcy filing expected in Japan, US

Air bag maker Takata bankruptcy filing expected in Japan, US

The company's bankruptcy filings Monday cleared the way for a $1.6 billion takeover of most of Takata's assets by Key Safety Systems, which is based in Detroit but owned by a Chinese company.

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.

Japanese air bag maker Takata Corp., facing lawsuits and recall costs, has filed for bankruptcy protection in Tokyo and the United States.

100 million inflators have been recalled worldwide, including 69 million in the U.S. The recalls affect over 42 million vehicles. That includes 69 million in the US, affecting 42 million vehicles.

The company paid $125 million to people injured by the airbags and $850 million to carmakers that used them.

"The sad saga of Takata. has resulted in the implosion of one of the automotive industry's oldest and most successful suppliers due to technical hubris, mismanagement and a systemic corporate culture of manipulation", said Scott Upham, the CEO of Valient Market Research.

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Takata Americas, its US arm, filed for Chapter 11 bankruptcy in DE 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.

Automakers will be able to recover some costs from Takata's remaining assets, but "experts say the companies still must fund a significant portion of the recalls themselves", reports The Associated Press.

Trading in Takata shares has been suspended on the Tokyo Stock Exchange, and the firm will be delisted late next month.

Honda now uses no Takata-sourced inflators for recall repairs in the US, and none of the company's new vehicles in mass production worldwide use Takata inflators with ammonium nitrate propellant, said Chris Martin, a Honda spokesman in the U.S.

They include billions being claimed by auto industry giants such as Honda, BMW, Toyota and others, which have borne the cost of recalls to date.

The defect in the inflators stems from use of the explosive chemical ammonium nitrate in the inflators to deploy air bags in a crash.

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Takata's major automaker clients reportedly support the bankruptcy filing plan. 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 global operations, makes inflators, seat belts and crash sensors for the auto industry. The deal is meant to allow Takata to continue operating without interruptions and with minimal disruptions to its supply chain.

The company is headquartered in Sterling Heights even though it was acquired past year by Chinese automotive conglomerate Ningbo Joyson Electronic.

Takata warned in bankruptcy documents that if it does not complete the restructuring by March and complete payments owed under the deal, the Justice Department could withdraw the plea agreement and seek higher penalties. Key Safety Systems will retain nearly all of Takata's employees and does not intend to shut down any of Takata's manufacturing facilities.

Takata would keep operations of its affected inflators for now to continue supplying recall replacement parts, and would eventually wind down those operations, the two companies said in a statement.

The airbag scandal has led to a slow and painful demise for Takata, which started out as a textile manufacturer more than 80 years ago and later came to specialize in seat belts and other auto safety equipment.

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