Japanese airbag manufacturer Takata has filed for bankruptcy protection in a court in Tokyo and the USA after multimillion-dollar losses caused by defective devices, the company announced on Monday.
Rival Key Safety Systems, based in suburban Detroit, will buy most of Takata's assets for $1.6 billion and take over its manufacturing operations to make seat belts, air bags and other automotive safety devices, according to two people briefed on the matter.
Japan's crisis-hit vehicle parts maker Takata said Monday it has filed for bankruptcy protection and its chief executive would quit, after a deadly airbag defect triggered the auto industry's biggest ever safety recall.
Because of the type of chemical propellant used by Takata, the defective air bags can inflate with too much force and spew deadly shrapnel at drivers and passengers.
For his part, Shigehisa Takada, Chairman & CEO of Takata, added:"KSS is the ideal sponsor as we address the costs related to airbag inflator recalls, and an optimal partner to the company's customers, suppliers and employees".
Filing for Chapter 11 bankruptcy protection will protect Takata from creditors and clears the way for it to receive financial support from Key Safety Systems, a Chinese-owned company based in MI.
"There was no other way", he said.
Another $125 million will go to victims and Takata will pay a $25 million fine to the USA government. He said progress of the recalls in other countries was unknown.
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The process could take years. "So a lot of these recalled vehicles have not been fixed, the airbags don't exist for them to be fixed yet". The scope of the recall means some vehicle owners face lengthy waits for replacement parts while continuing to drive cars with air bags that could malfunction in a crash.
Takata has already agreed to pay a billion-dollar fine to settle with USA safety regulators.
Key Safety Systems CEO Jason Luo told The Nikkei that responsibility for problems with air bags already shipped will remain with Takata. It pleaded guilty in the U.S.to a criminal charge of wire fraud for which it will have to pay $1 billion, including a $125 million fund to compensate victims and their families. The money will be paid in various accounts with $850 million going to auto manufacturers to fix the unsafe airbags, $125 million to the victims, and $25 million to the government.
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. Honda says Takata misrepresented, manipulated tests.
In September a year ago, BMW recalled 110,000 cars in Japan, while Honda, Japan's second-biggest carmaker, recalled 668,000 vehicles for the same issue, bringing the tally of cars it has had to bring back to its dealership to 51 million. Key is owned by Ningbo Joyson Electronic Corp. of China. Its global headquarters and USA technical center is in Sterling Heights, Michigan. A committee set up to explore restructuring has made a recommendation with Key as a suitor, but Takata's board had not decided on that last week, Takata said in a statement.
Takata's major automaker clients reportedly support the bankruptcy filing plan. "We hope the day will come when the word "Takata" becomes synonymous with 'safety, '" the website says.
Takata's ammonium-nitrate inflators now incorporate a drying agent, called a desiccant, and it's important that production continue to keep recall repairs moving.