Takata files for bankruptcy after massive air bag recall

Cheryl Sanders
June 27, 2017

In a statement, Takata said it was working with 14 vehicle manufacturers on "substantial accommodations" and "liquidity enhancements" to finance a restructuring, while entering into a deal to sell certain viable assets to Key Safety Systems for about $1.6 billion.

The company's executives sought to reassure their customers, suppliers and shareholders in a news conference on Monday.

"If things are left as is, we are aware of risks that we may not able to raise fund and to continue stable supply of products", he said.

TK Holdings, its USA operation, on Sunday filed Chapter 11 bankruptcy in DE with liabilities of between US$10 billion and US$50 billion, while the Japanese parent early yesterday filed for protection with the Tokyo District Court.

Total liabilities for Takata were 1.7 trillion yen or $15 billion, said one Japanese research firm on Monday.

Apart from the fatalities, they've been blamed for at least 180 injuries.

Takata is still in the process of replacing the recalled airbags, found in 34 types of USA vehicles, according to the National Highway Traffic Safety Administration, and the cost has been mounting.

Takata's debts have spiraled to an estimated $9 billion due to the massive recall program for defective airbags supplied to nearly two dozen automakers and used in an estimated 100 million vehicles across the globe.

More than a dozen deaths are linked to the company's faulty airbags.

"There was no other way", he said.

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.

As such, Takata has posted its third consecutive annual loss-and that does not even include the full costs of repairing those vehicles listed in the recall.

The major automakers who used Takata airbags in their cars - including Honda, Toyota and GM - could also end up out of pocket.

Takata and automakers were slow to address the problem with the inflators, despite reports of deaths and injuries.

In September a year ago, BMW recalled 110,000 cars in Japan, while Honda, Japan's second-biggest carmaker, recalled 668,000 vehicles for the same issue, bringing the tally of cars it has had to bring back to its dealership to 51 million.

The defect in the inflators stems from use of the explosive chemical ammonium nitrate in the inflators to deploy air bags in a crash. According to the company, they would be acquired by the US-based company Key Safety Systems for a couple of billion dollars.

Honda, which accounts for roughly half of the affected vehicles worldwide, has already booked charges amounting to 556 billion yen ($5 billion) for its air bag recalls.

The company in the US would maintain almost all of the 60,000 employees at Takata in 23 nations and keep its factories open in Japan.

The company paid $125 million to people injured by the airbags and $850 million to carmakers that used them. But the safety devices relied on a faulty inflator that when activated can explode and send shrapnel into the vehicle. Claims are continuing against Honda, Ford, Nissan and Takata.

Why is Takata filing for bankruptcy protection? The U.S. -based company is owned by Ningbo Joyson Electronic Corp. of China. Its global headquarters and US technical center is in Sterling Heights, Michigan.

GM added that does not anticipate any supply disruptions as a result of Takata's bankruptcy.

Other reports by iNewsToday