Tue, Jun 27, 2017 - Page 10 News List

Takata files for bankruptcy protection

DIVISION OF LABOR:The US’ Key Safety Systems is to take over the firm’s viable operations, while the rest are to continue to produce replacement airbag inflators

Reuters, TOKYO

Takata Corp chief executive officer Shigehisa Takada bows at the beginning of a news conference yesterday in Tokyo.

Photo: Kyodo News via AP

Japan’s Takata Corp, the firm at the center of the auto industry’s biggest-ever product recall, filed for bankruptcy protection in the US and Japan, and said it would be bought for US$1.6 billion by US-based Key Safety Systems Inc (KSS).

In the biggest bankruptcy of a Japanese manufacturer, Takata faces tens of billions of US dollars in costs and liabilities resulting from nearly a decade of recalls and lawsuits. Its airbags have been linked to at least 17 deaths around the world.

TK Holdings, its US operation, on Sunday filed Chapter 11 bankruptcy in Delaware 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.

Takata’s total liabilities stand at ¥1.7 trillion (US$15.3 billion), Tokyo Shoko Research Ltd estimated.

Final liabilities would depend on the outcome of discussions with automaker customers who have borne the bulk of the replacement costs, a lawyer for the company said.

The filings open the door to a financial rescue by Michigan-based KSS, a parts supplier owned by China’s Ningbo Joyson Electronic Corp (寧波均勝電子).

In a deal that took 16 months to hammer out, KSS agreed to take over Takata’s viable operations, while the remaining operations will be reorganized to continue churning out millions of replacement airbag inflators, the two firms said.

KSS would keep “substantially all” of Takata’s 60,000 employees in 23 countries and maintain its factories in Japan.

The agreement is meant to allow Takata to continue operating without interruptions and with minimal disruptions to its supply chain.

“We believe taking these actions in Japan and the US is the best way to address the ongoing costs and liabilities of the airbag inflator issues with certainty and in an organized manner,” Takata chief executive officer Shigehisa Takada said in a statement.

Takada said he and top management would resign “when the timing of the restructuring is set.”

His family — which still has control of the 84-year-old company — would likely cease to be shareholders.

KSS president and chief executive Jason Luo (羅冠宏) said in a statement that 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.

The companies expect to seal definitive agreements for the sale in the coming weeks and complete the twin bankruptcy processes in the first quarter of next year.

However, the filings have not resolved all issues.

Honda Motor Co, Takata’s biggest customer, said it has reached no final agreement with Takata on responsibilities for the recall, adding that it would continue talks with the supplier, but anticipated difficulties in recovering the bulk of its claims.

Takata faces billions of US dollars in lawsuits and recall-related costs to its clients, including Honda, BMW, Toyota Motor Corp and others which have been paying recall costs to date.

The company also faces potential liabilities stemming from class action lawsuits in the US, Canada and other countries.

Global transport authorities have ordered about 100 million inflators to be recalled. Industry sources have said that recall costs could climb to about US$10 billion.

The ammonium nitrate compound used in the airbags was found to become volatile with age and prolonged exposure to heat, causing the devices to explode.

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