Japan’s airbag giant Takata files for bankruptcy

TOKYO - Agence France-Presse

AFP photo

Japan’s crisis-hit car parts maker Takata filed for bankruptcy protection on June 26 and said its chief executive would quit after a deadly airbag crisis that triggered the auto industry’s biggest ever safety recall.

The company is facing lawsuits and huge costs over a defect blamed for at least 16 deaths and scores of injuries. The scandal affected almost every major global automaker, including Toyota and General Motors.

U.S.-based auto parts maker Key Safety Systems (KSS) will buy Takata for an estimated $1.58 billion.
Takata’s chief executive Shigehisa Takada, whose grandfather started the company in 1933 as a textile maker, said he would resign once the takeover was complete.

“I apologize from the bottom of my heart for causing trouble for everyone concerned,” Takada told a press briefing.

News reports have said Takata’s liabilities would exceed one trillion yen ($9 billion) in what is the biggest bankruptcy filing for a Japanese manufacturer.

Trading in Takata shares was suspended Monday after a week of wild volatility. The stock will be delisted from the Tokyo bourse late next month.

Little-known outside Japan, Takata evolved from a small factory into an automotive parts giant in the Eighties.

It has dozens of plants and offices in 20 countries, including the US, China and Mexico. The airbag division has accounted for more than a third of total annual revenue around 663 billion yen, with seatbelts and steering wheels among its other key products.

Jason Luo, president and chief executive of KSS, which is owned by China’s Ningbo Joyson Electronic, voiced confidence in Takata’s rehabilitation.

“Although Takata has been impacted by the global airbag recall, the underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat belts and other safety products have not diminished,” he said in a statement.

There were no immediate plans to reduce Takata’s 46,000-employee headcount or close factories as part of the deal, he added.

However, operations linked to the defective airbags will not become part of the combined company, and will later be wound down.

Takata shares soared more than 40 percent on June 23 after collapsing over the week as traders made bets on its likely bankruptcy.

Analysts attributed the upsurge on June 23 to speculative trading among short-term investors hoping to profit from wild swings in the share price.

Some 100 million airbags produced for some of the largest automakers are being recalled, including about 70 million in the US.

The problem has been linked to a chemical, ammonium nitrate, which is used as a propellant in Takata’s airbag inflator canisters. The component can degrade, especially in humid conditions, creating the risk that an airbag will improperly inflate and rupture, firing metal shrapnel at the vehicle’s occupants.

Takata -- which had been accused of hiding the problem for years along with its major automaker customers -- agreed this year to pay a billion-dollar fine to settle with U.S. safety regulators.

Honda, a major Takata customer, first sounded the alarm that there might be a problem in 2008. But the crisis reached a peak only in 2014 when earlier deaths started getting more media attention and the US National Highway Traffic Safety Administration became involved in the ballooning recalls.

Takata was heavily criticized for its handling of the public relations crisis, but some say its automaker clients also dragged their feet on dealing with the snowballing scandal.

“There should have been a quicker response” from the automakers, said Nobutaka Kazama, a business professor at Meiji University in Tokyo.

“It was the automakers who were selling the products and they need to respond (to the problems) as quickly as possible,” he added.

Toyota said Takata owes it some 570 billion yen in recall-related costs, but the auto giant and domestic rivals Nissan and Honda admitted Monday there was little chance of recouping that money in bankruptcy court.

“Although we have acquired the right to be reimbursed for the costs of both past and future recalls from Takata and its affiliates, following Takata’s filing, it is likely that we will not be able to exercise this right in most cases,” Nissan said.