Wed, Jun 21, 2017 - Page 10 News List

Takata bankruptcy means victims get less: experts

AP, DETROIT, Michigan

The logo of Japanese auto parts maker Takata is displayed at a car showroom in Tokyo on Jan. 13.

Photo: AFP

A bankruptcy filing by Japanese airbag maker Takata will leave little money for dozens of people who sued the company over deaths and injuries caused by its exploding airbag inflators, according to outside legal experts and lawyers suing the company.

Takata Corp and its US operations are likely to seek bankruptcy protection by the end of this month in a deal that would sell its assets to competitor Key Safety Systems Inc, a person briefed on the talks said.

The person did not want to be identified because discussions are in progress.

The price Key will pay is unknown, but much of it likely will go toward paying a US$1 billion US criminal settlement. Most of the settlement money will go to automakers as restitution for recall costs.

Key is expected to buy Takata’s assets “free and clear” of past liabilities, and lawyers say there will not be enough money to give victims what they would have received if they were suing a healthy company.

So far the faulty inflators have killed 11 people in the US and 16 worldwide. More than 180 people have been injured.

The problem touched off the biggest recall in US automotive history, involving 19 automakers, 42 million vehicles and up to 69 million inflators. About 100 million inflators have been recalled worldwide.

Takata’s troubles stem from use of the explosive chemical ammonium nitrate in the inflators to deploy airbags in a crash. The chemical can deteriorate when exposed to hot and humid air, and burn too fast, blowing apart a metal canister and spewing out metal fragments.

In February, Takata pleaded guilty to fraud and agreed to the US$1 billion settlement. Lawyers acknowledged in court that the company would have to be sold to fund the settlement.

Automakers would get US$850 million in restitution for recall costs and a US$25 million fine would be paid to the government. Takata has already paid US$125 million into a fund for victims.

“Takata intends to try to use our bankruptcy laws to escape responsibility for the injured and the families of the dead,” said Bradford Child, a Los Angeles lawyer who represents the family of a woman killed by a ruptured inflator.

In a statement last week, Takata maintained the possibility of keeping the company in operation.

A committee set up to explore restructuring has made a recommendation with Key as a suitor, but Takata’s board has not decided on it.

Douglas Baird, a bankruptcy law professor at the University of Chicago, said he expects Key will get Takata’s assets without liability for past claims.

Without this provision, no suitor would buy the company.

“It’s in the interests of all these victims that you have this free and clear sale,” he said. “The alternative is to liquidate the assets and sell them for kindling wood.”

Lawyers are unhappy that automakers will get US$850 million while relatively little goes to victims. Emison and others say US$125 million will go quickly, estimating that victims will get US$0.05 to US$0.10 on the dollar of what they would have received from a financially strong company. A court-appointed special master will come up with an allocation formula.

If Key pays more than US$1 billion for the company, victims could get more.

A similar pool set up by General Motors paid out nearly US$600 million to settle 399 death and injury claims due to ignition switches that could shut off cars without warning.

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