Science

Takata files for bankruptcy as air bag recalls bite

Takata files for bankruptcy as air bag recalls bite”

Japan's embattled Takata Corp. said on Monday that it had filed for bankruptcy protection and would sell its business to a US third party, in what is the biggest corporate failure ever of a Japanese manufacturer. Nikkei also reported the decision, without citing any sources for the information.

The sale would help Takata meet its $850 million payment obligation to auto makers early next year, part of a $1 billion plea deal with the U.S. Justice Department to settle a criminal investigation into the parts maker.

US lawmakers have criticized the pace of the recalls.

Liabilities of the Tokyo-headquartered firm now stand at an estimated 1 trillion yen (9 billion USA dollars), owing to the tens of millions of high-profile global recalls by automakers since 2008 of Takata's defective airbag inflators, which can spray lethal shrapnel inside the vehicle when deployed.

Takata Corp.in May reported a full-year group net loss of 79.59 billion yen (698.80 million US dollars), marking its third consecutive year of red ink, and booked a special loss of 132.98 billion yen owing to costs connected to the global recall. "We were running out of funding and there was a risk that we wouldn't be able to continue supplying products", Takada said with regards to filing for bankruptcy.

Under its agreement with Key, remnants of Takata's operations will continue to make inflators to be used as replacement parts in the recalls, which are being handled by 19 affected automakers.

"It's likely every automaker involved in this recall will have to subsidise the process because the value of Takata's assets isn't enough to cover the costs of this recall", said Karl Brauer, executive publisher of Kelley Blue Book and Autotrader.

Honda Motor Co, Takata's biggest customer, said it had reached no final agreement with Takata on responsibilities for the recall. The new sponsor will not be liable for these inflators, which use ammonium nitrate, the volatile chemical compound at the root of the defective airbags. Eventually they were forced to recall tens of millions of vehicles.

At least a billion dollars (£784 million) 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. Takata already has paid $125 million into a fund for victims. Settlement agreements with Toyota, Subaru, BMW and Mazda already have won preliminary court approvals, said the attorney, Peter Prieto.

That settlement will speed the removal of faulty inflators from 15.8 million vehicles and compensate consumers for economic losses, he said. Claims are continuing against Honda, Ford, Nissan and Takata.

Its shares were suspended Monday because they're going to be delisted, the Tokyo Stock Exchange said.

Key, a Chinese company with global operations, makes inflators, seat belts and crash sensors for the auto industry. KSS also intends to invest in many of Takata's other worldwide manufacturing facilities and technology and R&D centers.

"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. The company, founded in 1933, says on its website that its products have kept people safe, and it apologizes for problems caused by the faulty inflators.

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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