Takata Ready to File for Bankruptcy

Airbag supplier Takata Corp. will file for bankruptcy protection in Japan and the U.S. within the next few weeks, according to media reports.

The company is expected to file first in Japan. Its U.S. unit, TK Holdings Inc., will follow. Trading in the company’s shares was suspended on the Tokyo exchange on Friday.

The reports say Takata’s assets will be acquired for 180 billion yen ($1.6 billion) by U.S.-based Key Safety Systems Inc., a unit of China’s Ningbo Joyson Electronic Corp. Key will create a new operating subsidiary that continues to supply carmakers with airbags, seatbelts and other products. The new company will be responsible for recall-related liabilities.

Bankruptcy will enable Takata to shed an estimated 1 trillion yen ($9 billion) in liabilities. The obligations are associated with the worldwide recall of roughly 100 million of the company’s explosion-prone airbag inflators by 19 vehicle manufacturers. The devices can misfire in a crash, blasting metal shards into the passenger compartment. Faulty Takata inflators have been blamed for 17 fatalities and roughly 200 injuries.

The cost of recalling and replacing the affected devices will total an estimated 1.3 trillion yen ($12 billion), including as much as $9 billion in the U.S. Almost all the cost to date has been borne by the affected carmakers.

The founding Takada family, which controls about 60% of Takata, had favored an out-of-court settlement. But reports say that option would have left the company exposed to later bankruptcy as damages pile up in the form of fines and legal settlements with victims of the lethal inflators.

Takata’s carmaker customers prevailed on their demand for a court-mediated process that will fix the scope of the company’s liabilities and make a recovery more likely.