Washington — The largest recall in U.S. history has forced beleaguered Japanese air-bag manufacturer Takata Corp. to file for bankruptcy in the U.S. and Japan, and sell its remaining assets to a Michigan-based company.
The company, which is on the hook for repairing nearly 70 million air bag inflators that were used in 42 million cars, said Monday it has reached a deal worth 175 billion Japanese yen, or $1.59 billion, to sell its remaining global assets and operations to a Chinese-owned company known as Key Safety Systems that is headquartered in Sterling Heights.
Under the agreement between Takata and KSS, the Sterling Heights-based company will acquire almost all of Takata’s remaining assets. The companies said the reorganized Takata will still run operations related to its air bag inflators that rely on ammonium nitrate, which are at the heart of the U.S. recall.
Federal regulators and automakers said Monday that they expect the revamped Takata to still fulfill its obligations to provide parts to fix approximately 50 million air bag inflators that are included in its recall that have not yet been repaired.
Takata said it “expects to continue to meet demand for air bag inflator replacements without interruption.”
Takata has been on the rocks since flying shrapnel from exploding air bag inflators that were made by the company led to a recall of nearly 70 million inflators. The faulty air bag inflators have been linked to 11 deaths and more than 180 injuries in the United States.
Takata’s recall is the largest automotive callback in U.S. history. Approximately 46 million Takata air bags in 29 million cars already are subject to recall, with another 20 million to 25 million additional air bags set to be recalled with the next couple of years. Takata was ordered to recall all of the faulty air bags by the end of 2019.
The National Highway Traffic Safety Administration says the recall of defective air bag inflators made by Takata will encompass 34 vehicle brands and about 42 million cars in the U.S when it is completed. The agency says more than 16 million Takata air bags have been repaired as of May 26.
Takata and KSS said Monday that proceeds from the sale would be used to address costs that are related to the recall.
NHTSA said Monday, “Takata has assured NHTSA, and it is NHTSA’s expectation, that Takata will meet these obligations and remedy parts will continue to be available to vehicle manufacturers on schedule.”
Honda, Fiat Chrysler Automobiles and Toyota have had the most air bags recalled, according to NHTSA.
Honda alone has 17.8 million air bag inflators that were used in 11.4 million cars in its main brand and Acura that were affected by the Takata recall. Honda spokesman Chris Martin said in an email, “Takata’s bankruptcy will have no effect on Honda’s ability to complete recall repairs.
“Honda now uses recall replacement parts from alternative suppliers, not Takata, and we now have sufficient inventory of those inflators to continue recall repairs on all affected Honda and Acura models without any significant delay,” he said.
FCA and Toyota did immediately respond to a request for a comment.
Monique Brentley, communications manager for Ford Motor Co., said the company expects “an orderly process and to continue to meet customer demand for our vehicles.” Ford has five models that were included in Takata’s recall: the 2006-12 Ford Fusion; 2005-06 Ford GT; 2005-14 Ford Mustang and 2004-11 Ford Ranger.
Tom Wilkinson, communications manager for cybersecurity and safety for General Motors Co., said Monday GM had not experienced any supply interruptions and anticipates that Takata will continue an uninterrupted supply of component parts to GM during the insolvency proceedings.
Wilkinson said GM has approximately 502,000 vehicles in the U.S. and Canada that are part of the Takata recalls. He said an additional 436,000 GM-branded vehicles are part of the Toyota and Subaru’s Takata recalls.
Karl Brauer, executive publisher of Kelley Blue Book and Autotrader, said of Takata’s bankruptcy, “it’s likely every automaker involved in this recall will have to subsidize the process because the value of Takata’s assets isn’t enough to cover the costs of this recall.
“This will be a long process under the best of circumstances, and Takata going bankrupt, though not surprising, only adds to a potential increase in the time it takes to replace tens of millions of air bags,” he said. “There are still far more questions than answers on this topic.”
Federal regulators have required Takata to plead guilty to wire fraud and pay $975 million in restitution and $25 million in fines for the faulty air bags.
Stocks for Takata closed Friday on its final day of trading on the Tokyo Stock Exchange at 160 Japanese yen, or about $1.43, per share. The stock price had declined 81.3 percent since the beginning of this year.
KSS is an independent entity within its parent corporation, a Chinese company called Ningbo Joyson Electronic Corp. that is managed by a U.S.-based executive team. KSS says it has 13,000 employees worldwide, although it is unclear how many of those workers are in Michigan.
Attorneys for car owners in class-action lawsuits that were filed against Takata said they do not expect the company’s bankruptcy filing to impact existing claims against auto manufacturers that are still pending.
KSS said Monday it plans to “retain substantially all of Takata’s employees across the world on comparable employment terms as currently provided.”
Shigehisa Takada, chairman and CEO of Takata, said the company believes filling for bankruptcy in the U.S. and Japan “is the best way to address the ongoing costs and liabilities of the air bag inflator issues with certainty and in an organized manner while ensuring that Takata’s operations worldwide continue in the ordinary course and without interruption.”