Takata filed for bankruptcy protection Monday and agreed to be bought by a U.S. firm, signalling the end of the road for the Japanese airbag maker at the centre of the biggest-ever auto safety recall.
The company announced the move Monday morning Tokyo time.
The company says it is facing between US$10 billion and US$50 billion in liabilities from nearly a decade of recalls and lawsuits linked to its defective air bag inflators, which could explode with too much force, sending metal shrapnel into vehicle compartments.
The company faces massive costs from a global recall of inflators that have been linked to at least 11 deaths in the United States alone.
Takata Corp.in May reported a full-year group net loss of 79.59 billion yen (698.80 million USA dollars), marking its third consecutive year of red ink, and booked a special loss of 132.98 billion yen owing to costs connected to the global recall. This would leave affected automakers to cover the rest of the recall and replacement costs. Although Takata will use part of the sale proceeds to reimburse the automakers, experts say the companies still must fund a significant portion of the recalls themselves.
"You're talking about tens of millions of bags and they are still responsible for doing that and carrying out those replacements even in a bankruptcy filing", Karl Brauer, executive publisher of Autotrader and Kelley Blue Book, told CNBC's "The Rundown on Monday, referring to the ongoing recall and replacement process".
Because of the size of the recall, some auto owners face lengthy waits for replacement parts, and are still operating their cars anxious that the air bag could malfunction in a crash. Does not report incident to US transport authorities. With only 22 percent of the unsafe airbags repaired, it leaves roughly 54 million still on the road in the U.S. It is anticipated that more people will be injured by these malfunctioning airbags.
Late 1990s: Takata begins making air bags with ammonium nitrate. The chemical can deteriorate when exposed to hot and humid air and burn too fast, blowing apart a metal canister.
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. Of that amount, $850 million goes to automakers to help cover their costs from the recalls. United States auto safety regulators announced a record 200 million Dollars civil fine against Takata on November 4 for providing inadequate and inaccurate information about its dangerously explosive airbags installed in millions of cars.
The airbag scandal has led to a slow and painful demise for Takata, which started out as a textile manufacturer more than 80 years ago and later came to specialize in seat belts and other auto safety equipment.
Its new owner said there were no immediate plans to reduce Takata's employee headcount or close factories, as it tries to keep the business stable for customers. 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.
One of Takata's lawyers, Nobuaki Kobayashi, said it was too early to estimate the total eventual cost of the recalls and would not confirm Japanese media reports that they exceeded 1 trillion yen ($9 billion). Drowning in a sea of lawsuits and recall costs, Japanese air bag maker Takata Corp.is expected to seek bankruptcy. Key is owned by Ningbo Joyson Electronic Corp. of China.
Takata has 12 overseas subsidiaries that have also filed for bankruptcy protection.
More than a dozen deaths are linked to the company's faulty airbags.