Roiled by Airbag-Recall Crisis, Takata Files for Bankruptcy

Takata Corp. filed for bankruptcy protection in the biggest postwar Japanese corporate failure in the manufacturing industry, as the 84-year-old company buckled under liabilities from millions of recalled air bags and agreed to be sold to a Chinese-backed investor.

The Tokyo-based company and its units filed for creditor protection in the U.S. and Japan. The Chapter 11 bankruptcy in Delaware listed more than $10 billion in liabilities, including claims from automakers including Honda Motor Co. -- the biggest user of the air bags -- and Toyota Motor Corp. as well as individuals who have brought class-action lawsuits.

The filing is the culmination of a saga that began with a recall more than eight years ago but has spiraled as the company’s malfunctioning airbag inflators -- which sent shards of metal at drivers and passengers -- have been blamed for at least 17 deaths worldwide. It also removes the final hurdle for the supplier to be acquired by Key Safety Systems Inc., a unit of Ningbo Joyson Electronic Corp. founded by Wang Jianfeng, for 175 billion yen (US$1.6 billion).

“We were facing a severe situation and we weren’t able to wait any longer,” Takata Chairman and Chief Executive Officer Shigehisa Takada told a briefing in Tokyo Monday. The 51-year-old will step down after handing over the company to its new management.

The sale to Key Safety and the bankruptcy proceedings are expected to be completed by the first quarter of next year, Takata said in a statement. Key Safety will substantially retain all of Takata’s employees worldwide. The air-bag maker had 50,530 people as of March 2016, according to data compiled by Bloomberg.

Seventeen carmakers including BMW AG and Tesla Inc. were listed as unsecured creditors with unknown claims related to recalls and indemnification, according to the filing. Litigation claims included those from class action plaintiffs in the U.S. and Canada, and the attorney general of the U.S. Virgin Islands. The National Highway Traffic Safety Administration has an $180 million claim for fines and penalties.

Takata is unable to disclose the total of its liabilities as the company hasn’t reached an agreement on how to split the recall costs with the automakers, Nobuaki Kobayashi, a member of Takata’s steering committee, said at the news conference.

Key Safety’s purchase will exclude the assets and operations related to Takata’s manufacturing and sale of ammonium nitrate air-bag inflators, according to the company. The chemical is at the heart of the recall crisis, degrading over time under conditions of heat and humidity and resulting in uncontrolled explosions that ruptured air-bag parts.

The inflator operations are expected to be run by a reorganized Takata following the transaction closing and eventually will be wound down, the companies said.

The air-bag maker agreed on a 25 billion-yen loan with Sumitomo Mitsui Banking Corp. to fund operations in bankruptcy, according to a statement by the company.

Since September 2016, when Bloomberg reported that automakers were pushing for a court-led restructuring, Takata shares have slumped 62%, cutting the company’s current market value to $120 million. The Tokyo Stock Exchange suspended trading on the company all day Monday after the announcement and said the shares will be delisted July 27.