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Takata seeks US bankruptcy protection after air-bag recalls
[TOKYO] Takata Corp filed for bankruptcy in the US, more than eight years after initial recalls involving its defective air bags spiralled into the biggest safety crisis in automotive history.
The Tokyo-based supplier filed for Chapter 11 bankruptcy in Delaware, listing more than US$10 billion in liabilities, according to court filings. Takata entered the bankruptcy filing with a plan to sell the company.
Key Safety Systems Inc, a US air-bag maker, is set to take over Takata for about 180 billion yen (S$2.22 billion), people familiar with the matter have said.
Shares and bonds of Takata - whose products are used by carmakers including Honda Motor Co and Ford Motor Co - have slumped as investors anticipated an imminent bankruptcy filing by the manufacturer of faulty air-bag inflators linked to at least 17 deaths worldwide.
In the US alone, about 43 million air bags inflators are currently subject to recall, and only about 38 per cent have been repaired as of May 26, according to data on the US Department of Transportation's National Highway Traffic Safety Administration's website.
In Japan, the recall affects close to 19 million vehicles and is 73 per cent complete, a spokesman at the country's transport ministry said this month.
The challenges for Takata's acquirer will be manifold. The Japanese parts maker posted its third-straight annual loss even without including the full costs of repairing millions of air bags, which automakers are now paying for. It will have to stem an exodus of talent at Takata, even as it works to regain trust and demonstrate to automakers the process won't result in disruption of supplies.
Japan Credit Rating Agency on June 20 cut Takata's credit rating to the lowest level before default citing the increasing likelihood that the component maker will file for bankruptcy protection.
Even so, Key Safety, the world's fourth-largest air-bag maker bought by Ningbo Joyson last year, would gain greater access to Japanese automakers and the combined entity would pull closer in market share to leader Autoliv Inc.
Takata's biggest customer Honda first started recalling Accord and Civic models in 2008 to replace the supplier's air bags. The company's air-bag inflators used ammonium nitrate as a propellant that can be rendered unstable after long-term exposure to heat and humidity, leading them to rupture and spray metal shards at vehicle occupants. More than a dozen other automakers including Volkswagen AG, Toyota Motor Corp and General Motors Co have also recalled vehicles fitted with the Japanese company's devices.
In January, Takata admitted to hiding the deadly risks of its exploding air bags for about 15 years in an agreement to pay US$1 billion to US regulators, consumers and carmakers. Auto manufacturers including Toyota, Subaru Corp, Mazda Motor Corp and BMW AG reached settlements worth US$553 million to resolve economic-loss claims tied to the air-bag recalls.
Takata, founded by the Takada family in the 1930s as a textile maker, produced parachutes for the Imperial Japanese Army during World War II. In 1960, it started manufacturing seat belts for local automakers, which were leading the country's industrial expansion.A few years later, Honda asked Takata to look into manufacturing air bags.
Juichiro Takada, who had taken over from his father and company founder Takezo Takada in 1974, initially hesitated. Air bags deploy in controlled explosions, and he judged the risks of making them to be too great.
Eventually though, Takada relented. By 1989, air bags had become standard in all US cars. And in 1990, Takata produced its first air bag. In the early 2000s, Takata started using ammonium nitrate as propellant.
The parts maker went public in 2006, with the Takada family and trust retaining a majority stake. Shigehisa Takada, 51, took over the reins of the company when his father died in 2011. As recall followed recall, he apologised in written statements and newspaper ads, but he didn't make a public apology until June 2015, after the annual shareholder meeting.