Takata, the Japanese auto maker who has been embroiled in a deadly airbag scandal, filed for bankruptcy protection in the United States on Sunday. Takata’s airbags are the subject of the largest recall in U.S. history. The airbags have been blamed for at least 16 deaths, and Takata has been hit by more than a billion dollars in penalties and costs.
Takata’s airbags are used on vehicles in almost all of the major automakers worldwide. The airbags are in about a quarter of all vehicles on the road. The problem with the airbags are that they contain inflaters that can explode with too much force during a collision, sending potentially deadly shrapnel through the automobile cabin. Takata owes billions to automakers and banks, who have had to replace tens of millions of airbags that are potentially dangerous. Takata also has made a promise to the United States government to pay $125 million to victims. Lawsuits are likely to add to the financial burden.
Takata will sell its assets and factories to Key Safety Systems for about $1.6 billion. Key Safety Systems is a manufacturer of airbags and other automobile safety equipment. This deal most likely means the end of Takata, which was founded in 1933 and is still controlled by the same family.
Largest Bankruptcy By Japanese Manufacturer
The bankruptcy filing is said to be the largest in history by a Japanese manufacturer. Takata’s liabilities total around $19 billion, and bankruptcy will leave at least some of its creditors without being paid. Selling all of its assets will still not provide enough to pay all liabilities. The biggest unsecured creditors include all of the major automakers, such as Honda, Toyota and Fiat Chrysler.
Takata’s bankruptcy filing was not unexpected. The company had hoped to find a buyer for all or part of the business, and the Takata family appeared to be holding out hope to find a buyer or investor to keep the company out of bankruptcy. Questions over the costs of recalls and potential of lawsuits kept investors and buyers away.
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Kathryn Davis is an attorney at the Bond & Botes Law Offices in Huntsville and Decatur, Alabama. She holds a Bachelor of Arts from Auburn University, and a Juris Doctorate from Samford University, Cumberland School of Law. She is passionate about utilizing the bankruptcy process to help clients navigate through what is usually some of the lowest points in their lives. Read her full bio here.