DETROIT -- Japanese air bag maker Takata Corp., facing lawsuits and recall costs, has filed for bankruptcy protection in Tokyo and the United States.
The company announced the expected action this morning in Tokyo.
Takata was done in by defective air bag inflators that can explode with too much force, spewing out shrapnel. They're responsible for at least 17 deaths and 180 injuries worldwide and have touched off the largest automotive recall in U.S. history. So far 100 million inflators have been recalled worldwide including 69 million in the U.S., affecting 42 million vehicles.
Rival Key Safety Systems, based in suburban Detroit and owned by Ningbo Joyson Electronic Corp. of China, 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 an announcement by Takata and Key.
Under the agreement with Key, Takata's manufacturing of inflators will be kept separate in order to keep manufacturing inflators used as replacement parts in recalls. The recalls, which are being handled by 19 affected automakers, will continue.
Key also said it won't cut any Takata jobs or close any of Takata's facilities.
As of May 26, only 38 percent of the air bag inflators under recall in the U.S. had been repaired, according to data on the U.S. Department of Transportation's National Highway Traffic Safety Administration website. In Japan, 73 percent of the close to 19 million air bags under recall have been repaired, a spokesman at the country's transport ministry said this month.
At least $1 billion from the sale will be used to satisfy Takata's settlement of criminal charges in the U.S. for concealing problems with the inflators.
One of the people briefed on the filings said Key would get Takata's assets "free and clear" of past or future liabilities. That makes it unclear whether anyone injured by inflators in the future would have any legal recourse against either company.
Scott Upham, president of Valient Market Research, estimates that automakers and suppliers globally face $5 billion in future costs tied to the recalls, about $2 billion of which can be tied to Takata.
"There's not enough money," Upham said. Automakers may have to cover any shortfall, he said.
The car companies have already shifted business away from Takata and toward its rivals for about 70 percent of the parts to repair the millions of vehicles recalled for the company's defective air bag inflators. Companies say that should produce enough new inflators to replace the 100 million defective ones worldwide.
Takata's troubles stem from use of the explosive chemical ammonium nitrate in the inflators to deploy air bags in a crash. The chemical can deteriorate when exposed to hot and humid air and burn too fast, blowing apart a metal canister.
Honda first started recalling Accord and Civic models in 2008 due to the flaw. That same year, Takata began adding a drying agent to its propellant formula in an attempt to fix the problem. It has until the end of 2019 to prove to U.S. regulators that those air bags are safe.
Honda now uses no Takata-sourced inflators for recall repairs in the U.S., and none of the company's new vehicles in mass production worldwide use Takata inflators with ammonium nitrate propellant, said Chris Martin, a Honda spokesman in the U.S.
In February, Takata pleaded guilty to fraud and agreed to the $1 billion settlement. Lawyers acknowledged in court that the company would have to be sold to fund the settlement. Automakers would get $850 million in restitution for recall costs, and a $25 million fine would be paid to the government. Takata already has paid $125 million into a fund for victims.
Information for this article was contributed by Tom Krisher and Marcy Gordon of The Associated Press; and by Kevin Buckland, Masatsugu Horie, Ryan Beene and John Lippert of Bloomberg News.
A Section on 06/26/2017