Japanese airbag maker Takata files for bankruptcy, gets U.S. sponsor

© Reuters. Takata Corp. Chairman and CEO Shigehisa Takada and senior management bow as they attend a news conference after its decision to file for bankruptcy protection in Tokyo© Reuters. Takata Corp. Chairman and CEO Shigehisa Takada and senior management bow as they attend a news conference after its decision to file for bankruptcy protection in Tokyo

By Naomi Tajitsu

TOKYO (Reuters) – Japan's Takata Corp (T:), the firm at the centre of the auto industry's biggest ever product recall, filed for bankruptcy protection in the United States and Japan and said it would seek $ 1.6 billion in aid from U.S.-based Key Safety Systems (KSS). In one of Japan's biggest bankruptcies, Takata is facing tens of billions of dollars in costs and liabilities resultingfrom almost a decade of recalls and lawsuits. Its airbags have been linked to at least 17 deaths and more than 180 injuries. Its U.S. arm filed Chapter 11 bankruptcy in Delaware on Sunday with liabilities of $ 10 billion to $ 50 billion, while the Japanese parent filed for protection with the Tokyo District Court early on Monday.

The Tokyo Stock Exchange said its shares would be delisted on July 27. The filings opened the door to the financial rescue from auto parts supplier KSS, which Takata tapped as its preferredsponsor to help it keep churning out millions of replacementairbag inflators. Proceeds from the sale will be used to settlea plea agreement with the U.S Department of Justice.

The filings have, however, not resolved all issues. Honda Motor Co (T:), Takata's biggest customer, said it had reached no final agreement with Takata on responsibilities for the recall. Honda said it will continue talks with the supplier but anticipates difficulties in recovering the bulk of its claims. Takata, an 84-year-old company, faces billions in lawsuits and recall-related costs to its clients, including Honda, BMW (DE:), Toyota Motor Corp (T:) and others which have been paying recall costs to date. Takata said its agreement with KSS would mean the company could continue to operate without interruptions to its operations.

“We believe taking these actions in Japan and the U.S. is the best way to address the ongoing costs and liabilities of theairbag inflator issues with certainty and in an organised manner,” Takata CEO Shigehisa Takada said in a statement. Jason Luo, president and CEO of KSS, said in a statement the”underlying strength” of Takata's business had not diminisheddespite the airbag recall, citing its skilled employee base,geographic reach and other safety products such as seat belts.As part of the bankruptcy protection plans, KSS wouldacquire all of Takata's assets barring certain assets andoperations related to the airbag inflators involved in theglobal recall in the planned deal, the two companies said. Takata will keep operations of its affected inflators fornow to continue supplying recall replacement parts, and will eventually wind down those operations.

UNPRECEDENTED RECALLS

Global transport authorities have ordered about 100 millioninflators to be recalled. Industry sources have said that recall costs could climb to about $ 10 billion. The ammonium nitrate compound used in the airbags was foundto become volatile with age and prolonged exposure to heat,causing the devices to explode. Costs so far have pushed the company into the red for thepast three years, and it has been forced to sell subsidiaries topay fines and other liabilities. Industry sources say Takata would be able to complete thecurrent global recall under bankruptcy, but could face problemsif further recalls are required down the line. It has soughthelp from rival suppliers including Sweden's Autoliv Inc (N:)to produce replacement inflators. It also faces potential liabilities stemming from classaction lawsuits in the United States, Canada and othercountries. Earlier this year, Takata pleaded guilty to a criminalcharge of falsifying data on its inflator defects, agreeing topay a $ 1 billion fine. Founded as a textiles company in 1933, Takata beganproducing airbags in 1987 and at its peak became the world's No.2 producer of the safety products. It also produces one-third ofall seatbelts used in vehicles sold globally, along withchildseats, steering wheel systems and other components. CEO and Chairman Shigehisa Takada, the bookish grandson ofthe company's founder, has been criticised for his handling ofthe recall crisis. He has promised to resign after a newmanagement team takes over.

($ 1 = 111.2800 yen)

Disclaimer:Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Let’s block ads! (Why?)

Stock Market News

You May Also Like

Leave a Reply