Overwhelmed By Air Bag Troubles, Takata Files For Bankruptcy Protection

Ivan Schwartz
June 26, 2017

Earlier this year, Takata admitted to manipulating and withholding key information about the faulty inflators for years, even after they started exploding in people's cars.

The company's defective airbag inflators, which can explode and send shrapnel into drivers and passengers, have been blamed for 11 deaths in the US and several others elsewhere.

Takata said Monday it's seeking bankruptcy protection both in Japan, where it's based, and in the U.S. The process of making all US vehicles safe again could last until 2023.

Takata has already agreed to pay a billion-dollar fine to settle with USA safety regulators over its airbags, and the company was heavily criticised for staying largely silent as the crisis grew.

The companies expect to seal definitive agreements for the sale in coming weeks and complete the twin bankruptcy processes in the first quarter of 2018.

However, operations linked to the defective airbags will not become part of the combined company, which "will be run by reorganised Takata. and eventually will be wound down".

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.

But that figure is not expected to increase because of Takata's bankruptcy, Honda spokesman Kosuke Kachi said.

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Honda Motor Co (7267.T), Takata's biggest customer, said it had reached no final agreement with Takata on responsibilities for the recall. It announced it would sell key assets to Key Safety. Upham said they're likely to have to pick up the tab for most of the estimated $5 billion that's needed to pay for replacing the tens of millions of Takata airbag inflators still in people's vehicles around the world.

Jason Luo, president and chief executive of KSS, voiced confidence in Takata's rehabilitation.

But in certain limited cases, Honda still uses ammonium nitrate inflators from Takata as replacements for those recalled, Kachi said.

It's the largest safety recall in automotive history.

And U.S. lawmakers have criticized Takata's slow pace of addressing the recalls. Of that amount, $850 million goes to automakers to cover their costs of the recalls. Takata already has paid $125 million into a fund for victims.

Trading in Takata shares was suspended at the opening of the stock market Monday after a week of wild volatility and the Tokyo exchange said it would delist the firm on July 27.

May 18, 2017: Four automakers - Toyota, Mazda, Subaru and BMW - agree to their own settlement with consumers over economic-loss claims by owners of vehicles equipped with Takata air bags. The company says on its website that its products have kept people safe, and it apologizes for problems caused by the faulty inflators. Key Safety, an independent subsidiary of Chinese-based supplier Ningbo Joyson Electronic Corp., is expected to get a substantial leg-up into new marketplaces.

Other reports by GizPress

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