Takata, the Japanese air bag maker, announced Monday it is filing for bankruptcy protection in both Japan and the United States, after struggling for more than a decade to manage recalls related to its faulty products. Separately, it said its assets would be acquired by Key Safety Systems, an American producer of vehicle safety systems.
The Tokyo-based company rose to prominence in the early 1990s after creating a less-expensive type of air bag. But the safety devices relied on a faulty inflator that when activated can explode and send shrapnel into the vehicle. The air bags have since been linked to more than a dozen deaths and approximately 180 injuries in the United States alone, causing the recall of 42 million vehicles and up to 69 million air bag inflators.
In February, Takata pleaded guilty for falsifying testing data and reports provided to automakers. The company was fined $25 million, and ordered to set up restitution funds of $125 million for individual victims and $850 million for damages caused to automakers.
Takata is still in the process of replacing the recalled air bags, found in 34 types of U.S. vehicles, according to the National Highway Traffic Safety Administration, and the cost has been mounting. Last week, Takata disputed Japanese media reports that it was planning to file for bankruptcy, saying no decision had been made. But on Monday, the company announced its deal with Key Safety Systems and said it would be filing for Chapter 11 bankruptcy protection.
Under the $1.59 billion deal, Detroit-based Key Safety Systems would acquire 56 Takata plants that employ 46,000 people and leave responsibility for the recalls and other liabilities with the reorganized Takata. In addition, Takata said it had obtained financing of up to $227 million from the Japanese Sumitomo Mitsui Banking Corp.
“Takata expects to continue to meet demand for airbag inflator replacements without interruption,” Takata said in a statement.
Even after the sale, analysts said Takata probably does not have enough money to deal with all the recalls.
“Other people will have to chip in, which would be the automakers,” said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book, a California-based valuation and automotive research company.
Takata’s president Shigehisa Takada told reporters in Tokyo that with the company rapidly losing value, filing for bankruptcy protection was the only way it could carry on.
“We’re in a very difficult situation, and we had to find ways to keep supplying our products,” Takada said, according to the Associated Press. “As a maker of safety parts for the automobile industry, our failure to maintain a stable supply would have a major impact across the industry.”
“There was no other way,” he said.
The Key Safety Systems portion of the deal, slated to close in early 2018, would create a conglomerate of 60,000 employees in 23 countries. Key Safety Systems committed to not shutting down Takata’s manufacturing facilities in Japan, and the U.S. firm agreed to establish an Asian headquarters in Tokyo.
“After this ownership change is done and recalls are considered completed, you might never hear their name again, and the company is essentially going to vanish from the industry,” Brauer said.
Takada said he intends to leave Takata management once the deal with Key Safety Systems is finalized.
“It would be a big nuisance for the new company if a person like me were to get involved in its management,” he said, according to the AP.