Airbag Maker Takata Files Bankruptcy, Plans Sale

Japanese airbag maker Takata Corp. filed for bankruptcy protection in the U.S. and Japan, and said it would be bought for $1.6 billion by U.S.-based Key Safety Systems, which is owned by a Chinese firm.

Defective airbag inflators produced by Takata have been linked to at least 17 deaths around the world.

Takata Americas, its U.S. arm, filed for Chapter 11 bankruptcy protection in Delaware on June 25 with reported liabilities of $10 billion to $50 billion. The Japanese parent and other subsidiaries filed for protection with the Tokyo District Court on June 26.

(Read "Airbag Recall Tests Global Supply Chain.")

Final liabilities would depend on the outcome of discussions with carmaker customers who have borne the bulk of the replacement costs, a lawyer for the company was quoted as saying.

The filings open the door to a financial rescue by Key Safety Systems, a Michigan-based parts supplier owned by China's Ningbo Joyson Electronic Corp.

Under the agreement, KSS will acquire substantially all of Takata’s assets, except for certain assets and operations that relate to Takata’s manufacturing and sale of phase-stabilized ammonium nitrate (PSAN) airbag inflators. Takata’s PSAN-related operations will be run by reorganized Takata following the transaction closing and eventually will be wound down.

Key Safety says the transaction could close in the first quarter of 2018.

News reports say that Takata will also receive a $227 million lifeline from its main lender, Sumitomo Mitsui Banking Corp., in the form a debtor-in-possession financing.

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

Deaths and injuries due to faulty vehicle airbag inflators made by Japan’s Takata Corp. have led to one of the largest vehicle recalls in U.S. history, and the problem affects vehicles worldwide. Officials say the defective airbags have been responsible for at least 11 deaths and more than 180 injuries in the U.S. alone through late 2016.

The recall continues to expand. More than a dozen automakers announced new recalls in January 2017. The recall at present affects about 20 automakers and involves airbags that for the most part were installed in vehicles from model years 2002 through 2015.

Takata in 2016 said it had sold about 288 million airbag inflators to automakers worldwide since 2001. It said its cost to correct the problem could approach $24 billion if it had to execute a total global recall.

The U.S. National Highway Traffic Safety Administration (NHTSA) in December 2016 said it expects the inflator recall, which began in 2004 but did not ramp up until 2014, could by 2020 The recall could affect 42 million vehicles in the U.S. and at least 64 million airbags.

The recall could affect 42 million vehicles in the U.S. and at least 64 million airbags.

That's because the defect can be found in both driver- and passenger-side airbags. Some reports have said those numbers could eventually be much higher.