Japanese Car Companies Brace for Takata Bankruptcy

Takata Said to Plan Filing for Bankruptcy as Soon as Week

The Nikkei reported earlier that Takata is expected to file for bankruptcy in Japan as early as this month, with liabilities exceeding $9.02 billion (1 trillion yen). Takata is working towards a deal for financial backing from the USA auto parts maker Key Safety Systems Inc., according to sources. A person briefed on the matter told Reuters that Key was expected to acquire Takata assets as part of a restructuring in bankruptcy.

Automobile industry analysts say the number of vehicle recalls prompted by faulty Takata air bags would eventually exceed 100 million units globally. More than 65 percent of 46.2 million recalled Takata air bag inflators in the United States have not been repaired. Completing the task of replacing all faulty inflators in the U.S. could cost as much as $8 billion, a United States judge claims.

While Takata's filing for bankruptcy might help the company secure financial banking, it has also become a cause for concern to its clients, which are major global auto manufacturers.

Above all Honda Motor, which as Takata's largest customer is one of the worst affected, have to recall their famous Accord and Civic models in 2008 because of the airbags.

"Less than one year ago, a member of our community lost her life when the recalled airbag in her vehicle exploded like a grenade, spraying sharp, metal shrapnel at her face, neck and chest", Riverside mayor Rusty Bailey said in a news release. They also have been blamed for more than 180 injuries worldwide.

Moreover the company paid a $25 million fine, $125 million to people hurt by the airbags and $850 million to companies that used them. The automotive parts supplier is facing an $850 million payment to auto makers, as part of a settlement for a U.S. Justice Department criminal probe. In the same month, a grand jury indicted three former executives for criminal wrongdoing in connection with the safety defects.

Shizuoka police suspect the Takata employee did not notify Nissan that the air bag inflator may rupture, while the Nissan official allegedly failed to instruct Nissan dealers to disable the recalled air bag.

Last month, four automakers including Toyota Motor Corp agreed to a $553 million settlement to address class-action economic loss claims covering owners of almost 16 million recalled vehicles with Takata inflators. "Presumably, Takata will continue manufacturing airbags throughout the bankruptcy proceedings".

If the inevitable does happen, Takata will be remembered as the largest bankruptcy in Japan post-World War II history.

"Longer term, the question is whether Takata, with a new owner, can rebuild trust with automakers to build future business".

"Replacing defective airbags is still the most important issue for manufacturers on the Takata front, and the most important issue for this story as a whole".

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