TOKYO – Japan’s Takata Corp, the firm at the center of the auto industry’s biggest ever product recall, filed for bankruptcy protection in the United States and Japan, and said it would be bought for $1.6 billion by U.S.-based rival Key Safety Systems.
In the biggest bankruptcy of a Japanese manufacturer, Takata faces tens of billions of dollars in costs and liabilities resulting from almost a decade of recalls and lawsuits. Its defective airbag inflators have been linked to at least 17 deaths around the world.
Takata Americas, its U.S. arm, filed for Chapter 11 bankruptcy in Delaware on Sunday with liabilities of $10 billion to $50 billion, while the Japanese parent and subsidiaries filed for protection with the Tokyo District Court early on Monday.
Takata’s total liabilities stand at 1.7 trillion yen ($15 billion), Tokyo Shoko Research Ltd estimated.
Final liabilities would depend on the outcome of discussions with carmaker customers who have borne the bulk of the replacement costs, a lawyer for the company said.
The filings open the door to the financial rescue by Key Safety Systems (KSS), a Michigan-based parts supplier owned by China’s Ningbo Joyson Electronic Corp.
In a deal that took 16 months to hammer out, KSS agreed to take over Takata’s viable operations, while the remaining operations will be reorganized to continue churning out millions of replacement airbag inflators, the two firms said.
Takata will also receive a $227 million lifeline from its main lender, Sumitomo Mitsui Banking Corporation, in the form a debtor-in-possession financing.
KSS would keep “substantially all” of Takata’s 60,000 employees in 23 countries and maintain its factories in Japan. The deal is meant to allow Takata to continue operating without interruptions and with minimal disruptions to its supply chain.
“We believe taking these actions in Japan and the U.S. is the best way to address the ongoing costs and liabilities of the airbag inflator issues with certainty and in an organized manner,” Takata CEO Shigehisa Takada said in a statement.
Takada said he and top management would resign “when the timing of the restructuring is set”.
His family – which still has control of the 84-year-old company – likely would cease to be shareholders.
Jason Luo, president and CEO of KSS, said in a statement the “underlying strength” of Takata’s business had not diminished despite the airbag recall, citing its skilled employee base, geographic reach and other safety products such as seat belts.
The companies expect to seal definitive agreements for the sale in coming weeks and complete the twin bankruptcy processes in the first quarter of 2018.
The filings have, however, not resolved all issues, as Takata still needs to reach agreements with its carmaker clients on how to divvy up recall costs.
Honda Motor Co, once Takata’s biggest customer, said it had reached no final agreement on responsibilities for the recall. Like other Japanese automakers, Honda said it anticipated difficulties in recovering the bulk of its claims.
“We are already beyond the point where there is room for negotiations or complications,” said Julie Boote, analyst at market researcher Pelham Smithers in London. ”(Automakers) know they’re not getting the money back but need the inflators.”
Takata faces billions in lawsuits and recall-related costs to its clients, including Honda, BMW, Toyota Motor Corp, which have been paying recall costs to date.
It also faces potential liabilities from class action lawsuits in the United States, Canada and other countries.
Global transport authorities have ordered about 100 million inflators to be recalled, as the ammonium nitrate compound used to inflate has been found to become volatile with age and prolonged exposure to heat, causing the devices to explode.
Industry sources have said that recall costs could climb to about $10 billion.
Takata produces roughly one-quarter of all replacement inflators, according to Valient Market Research, making it a significant supplier for now even as many automakers have shunned the company for future contracts.
Recall costs so far have pushed the company into the red for three years, and Monday’s bankruptcy filings marked a low point of a slow and steady downfall of Takata, which was founded as a textiles company in 1933 that used its weaving technology to make lifelines for parachutes.
It began producing airbags in 1987 and at its peak became the world’s No. 2 producer of the safety product. It also produces one-third of all seatbelts used in vehicles sold globally, along with other components.
The Tokyo Stock Exchange said its shares would be delisted on July 27. The stock has collapsed 95 percent since January 2014 as the recalls mounted.
($1 = 111.3000 yen)
AFFECTED VEHICLES (total U.S.-market number in parentheses, if known):
Acura: 2002–2003 3.2TL; 2003 3.2CL; 2003–2006 MDX; 2005–2012 RL; 2007–2016 RDX; 2009–2014 TL and TSX; 2010–2013 ZDX; 2013–2016 ILX (including hybrid)
Audi (more than 387,000): 2004–2009 A4; 2005–2009 S4; 2003–2011 A6; 2006–2013 A3; 2006–2009 A4 cabriolet; 2007–2008 RS4; 2007–2009 S4 cabriolet; 2007–2011 S6; 2008 RS4 cabriolet; 2009–2012, 2015 Q5; 2010–2011 A5 cabriolet; 2010–2012 S5 cabriolet; 2016–2017 TT; 2017 R8
BMW (more than 1.97 million): 2000–2011 3-series sedan; 2000–2012 3-series wagon; 2000–2013 3-series coupe and convertible; 2000–2013 M3 coupe and convertible; 2001–2003 5-series and M5; 2001–2013 X5; 2007–2010 X3; 2008–2013 1-series coupe and convertible; 2008–2011 M3 sedan; 2008–2014 X6 (including hybrid); 2011–2015 X1
Buick: 2015 LaCrosse
Cadillac: 2007–2014 Escalade, Escalade ESV; 2007–2013 Escalade EXT; 2015 XTS
Chevrolet (more than 1.91 million, including Buick, Cadillac, GMC, Saab, and Saturn): 2007–2014 Silverado HD, Suburban, and Tahoe; 2007–2013 Avalanche and Silverado 1500; 2015 Camaro, Equinox, and Malibu
Chrysler: 2005–2015 300; 2006–2008 Crossfire; 2007–2009 Aspen
Daimler: 2006–2009 Dodge Sprinter 2500 and 3500; 2007–2017 Freightliner Sprinter 2500 and 3500; 2008–2009 Sterling Bullet 4500 and 5500
Dodge/Ram (more than 5.64 million, including Chrysler, not including Daimler-built Sprinter): 2003–2008 Ram 1500; 2003–2009 Ram 2500; 2003–2010 Ram 3500; 2004–2009 Durango; 2005–2008 Magnum; 2005–2011 Dakota; 2006–2015 Charger; 2008–2014 Challenger; 2008–2010 Ram 4500 and Ram 5500
Ferrari (more than 2820): 2009–2014 California; 2010–2015 458 Italia; 2012–2016 Ferrari FF; 2012–2015 458 Spider; 2013–2017 Ferrari F12berlinetta; 2014–2015 458 Speciale; 2015 458 Speciale A; 2015–2017 California T; 2016–2017 Ferrari F12tdf, 488GTB, and 488 Spider; 2016 Ferrari F60; 2017 Ferrari GTC4Lusso
Fisker: 2012 Karma
Ford (3 million, including Lincoln and Mercury): 2004–2011 Ranger; 2005–2006 GT; 2005–2014 Mustang; 2006–2012 Fusion; 2007–2010 Edge
GMC: 2007–2014 Sierra HD, Yukon, and Yukon XL; 2007–2013 Sierra 1500; 2015 Terrain
Honda (11.4 million, including Acura): 2001–2012 Accord; 2001–2011 Civic (including hybrid and NGV); 2002–2011, 2016 CR-V; 2002–2004 Odyssey; 2003–2015 Pilot; 2003–2011 Element; 2006–2014 Ridgeline; 2006–2010, 2012 Gold Wing motorcycle; 2007–2013 Fit; 2010–2015 Accord Crosstour; 2010–2014 Insight and FCX Clarity; 2011–2015 CR-Z; 2013–2014 Fit EV
Infiniti: 2001–2004 I30/I35; 2002–2003 QX4; 2003–2008 FX35/FX45; 2006–2010 M35/M45
Jaguar: 2009–2015 XF
Jeep: 2007–2016 Wrangler
Land Rover (more than 68,000): 2007–2012 Range Rover
Lexus: 2002–2010 SC430; 2006–2013 IS; 2007–2012 ES; 2008–2014 IS F; 2010–2015 IS C; 2010–2017 GX; 2010–2015 IS convertible; 2012 LFA
Lincoln: 2006–2012 Lincoln Zephyr and MKZ; 2007–2010 Lincoln MKX
Mazda (more than 733,000): 2003–2011 Mazda 6; 2006–2007 Mazdaspeed 6; 2004–2011 RX-8; 2004–2006 MPV; 2004–2009 B-series; 2007–2012 CX-7; 2007–2015 CX-9
McLaren: 2011–2015 P1; 2012–2014 MP4-12C; 2015–2016 650S; 2016–2017 570; 2016 675LT
Mercedes-Benz (1,044,602, including Daimler): 2005–2014 C-class (excluding C55 AMG but including 2008–2012 C63 AMG); 2007–2008 SLK-class; 2007–2017 Sprinter; 2009–2012 GL-class; 2009–2011 M-class; 2009–2012 R-class; 2010–2011 E-class sedan and wagon; 2010–2017 E-class coupe; 2011–2017 E-class convertible; 2010–2015 GLK-class; 2011–2015 SLS AMG coupe and roadster
Mercury: 2006–2011 Milan
Mitsubishi (more than 105,000): 2004 Lancer Sportback; 2004–2007 Lancer; 2004–2006 Lancer Evolution; 2006–2009 Raider; 2012–2017 iMiEV
Nissan (more than 1,091,000, including Infiniti): 2001–2003 Maxima; 2002–2004 Pathfinder; 2002–2006 Sentra; 2007–2012 Versa
Pontiac (more than 300,000): 2003–2010 Vibe
Saab: 2003–2011 9-3; 2005–2006 9-2X; 2006–2009 9-5
Saturn: 2008–2009 Astra
Scion: 2008–2015 xB
Subaru (more than 380,000): 2003–2014 Legacy and Outback; 2003–2006 Baja; 2004–2011 Impreza; 2006–2014 Tribeca; 2009–2013 Forester; 2012–2014 WRX and WRX STI
Tesla: 2012–2016 Tesla Model S
Toyota (6 million, including Lexus and Scion): 2002–2007 Sequoia; 2003–2013 Corolla and Corolla Matrix; 2003–2006 Tundra; 2004–2005 RAV4; 2006–2012 Yaris; 2010–2016 4Runner; 2011–2014 Sienna
Volkswagen (more than 680,000): 2006–2010, 2012–2014 Passat sedan and wagon; 2009–2017 CC; 2009–2013 GTI; 2010–2014 Jetta SportWagen and Golf; 2010–2014 Eos; 2013 Golf R; 2015 Tiguan
We will update this list as soon as new information is available, but you can access NHTSA’s own running tally of affected vehicles here. For further information about your specific vehicle, go to the manufacturer’s consumer website or use NHTSA’s VIN-lookup tool.