Takata, the Japanese auto supplier that’s drowning in airbag recalls and lawsuits, has filed for bankruptcy protection in the U.S. and Japan, clearing the way for a Chinese-American manufacturer to buy its surviving operations for $1.6 billion.
The deal was announced June 26 in Japan and effectively brings the 85-year old family-owned company to an end. Key Safety Systems, a Michigan auto supplier owned by Ningbo Joyson Electronic Corporation of China, said it is buying Takata’s manufacturing facilities.
The buyout should position Key Safety Systems, which already manufactures airbags and other auto parts, as a frontrunner in the global airbag market. The deal will have to be approved by antitrust regulators as it increases Key Safety Systems’ control of the airbag market from a quarter to half, with the other half shared by a number of other competing companies. There is no word yet on how long the process will take.
Takata’s airbag scandal and subsequent recalls, government penalties, and legal costs have put the company billions of dollars in debt. The company’s woes stem from its making and selling of millions of potentially deadly airbag inflators, which rely on ammonium nitrate, a highly unstable chemical compound, to inflate the bags.
At least 16 people have been killed by Takata airbags that inflated with deadly force, blasting metal fragments of the device’s container at vehicle occupants. The faulty Takata airbags have injured about 200 others.
Takata’s bankruptcy is believed to be the largest ever of a manufacturing company in Japan. According to The New York Times, credit-rating agency Tokyo Shoko Research estimates Takata’s current liabilities to be about $15 billion.
The immense debts Takata owes means that many, if not most, of Takata’s unsecured creditors will go unpaid because the sale of its assets isn’t enough to cover its debts. Virtually all the major automakers, especially Honda, Toyota, and Fiat-Chrysler, will suffer financial losses because of the bankruptcy.
Approximately 70 million Takata airbag units have been recalled in the U.S., affecting more than 42 million vehicles. Millions more airbag inflators and vehicles are included in the recall worldwide.