Air Bag Manufacturer Files Bankruptcy in US and Japan
Japanese airbag manufacturer, Takata Corp, has been at the center of largest product recall in automotive history. In fact, the term "exploding airbags" was coined many months ago when it was learned that a faulty inflator could fail sending shrapnel flying. So far, 100 million inflators have been recalled worldwide. That includes 42 million vehicles in the United States alone. Apart from 16 known fatalities, the failed inflators are responsible for more than 180 injuries. T.K. Holdings, the company's U.S. operations, filed Chapter 11 in Delaware earlier this week with $10 billion to $50 billion in estimated liabilities.
In February, Takata had pleaded guilty to felony charges in U.S. federal court as part of a $1 billion settlement that included victims of airbag failures. Devastated by recall costs and ongoing lawsuits, the Japanese safety equipment manufacturer said this was the only option that would allow the company to continue supplying replacements for the faulty inflators. The Japanese giant was behind the eight ball from the beginning when information was leaked that the safety equipment company had known about the faulty part for years. The Justice Department issued a strict warning that the plea agreement could be withdrawn and higher penalties levied if restructuring of the company failed to meet established timelines.
Founded in 1933 as a textile manufacturer, the costs associated with the recall has forced the company into the red for three years with an estimated total cost around $10 billion. Takata has also agreed to be largely acquired by the Chinese-owned but U.S.-based Key Safety Systems. The U.S. manufacturing company would retain most of the 60,000 Takata employees in 23 countries as well as maintain its factories in Japan. Under the sales agreement, Key Safety Systems will continue to produce inflators to be used as replacement parts. Proceeds from the sale of the company will be used in part to reimburse the nineteen affected automakers.