Chinese-owned Key Safety Systems plans bid for Takata
Key Safety Systems, the world’s fourth-largest air-bag maker that was acquired by a Chinese parts maker, plans to bid for Japan’s Takata Corp., which is seeking buyers to overcome record recalls,according to a person familiar with the matter.
Key Safety has received an invitation from Takata and will review the company’s business operations to prepare for the bid, according to the person, who asked not to be identified because the matter is confidential. Key Safety, owned by China’s Ningbo Joyson Electronic Corp., is pressing ahead even asan audit commissioned by Takata and Honda Motor Co. found more evidence that the supplier manipulated air-bag inflator testing data.
Takata has been working on a restructuring plan and is said to be open to a sale to a private equity partner, a parts supplier or a combination. As many as 15 deaths, including 10 in the U.S., have been linked to its defective air-bag inflators, which can rupture and spray plastic and metal shards at drivers and passengers. Ruptures also have led to more than 100 serious injuries, according to the National Highway Traffic Safety Administration.
“For Takata to continue as a safety parts supplier, it definitely needs the help from Key Safety Systems,” Ken Miyao, an analyst with Tokyo-based market researcher Carnorama, said by phone. “Key Safety Systems will also find Takata’s customer base and air bag production know-how useful. So it will benefit both companies if they join force.”
Takata is not in a position to comment as it has appointed an external committee to handle the restructuring plan, said Akiko Watanabe, a companyspokeswoman. Ningbo Joyson spokesman Chen Yang declined to comment.
For Bloomberg Businessweek’s June cover story on Takata, click here.
Joysonbought Key Safety for about $920 million in cash after U.S. regulators fined Takata and ordered it to phase out the use of ammonium nitrate as its air-bag inflator propellant. Combining with Takata wouldcreate the world’s No. 2 air-bag supplier by sales, behind Sweden’s Autoliv Inc., according to Valient Market Research. It would also broaden Joyson’s access to Japanese automakers led by Honda.
Takata and Honda jointly commissioned a third-party audit of how the supplier validated the performance of its air-bag inflators. The review has turned up many instances of Takata engineers selectively editing validation reports, Brian O’Neill, the former president of the Insurance Institute for Highway Safety who’s led the audit, said by phone.
The U.S. National Highway Traffic Safety Administration in May ordered Takata to recall air-bag inflators through 2019, potentially doubling the number of components being replaced. General Motors Co. said Wednesday that it plans to prove that the inflators in its vehicles don’t pose an unreasonable risk to safety.
The largest U.S. automaker said it will demonstrate to NHTSA that the inflators in its vehicles are working properly and haven’t degraded. If GM is still obligated to recall, the company estimated as much as $320 million in costs for the 2.5 million vehicles recalled in May, and another $550 million for as many as 4.3 million vehicles in the future.
Key Safety isplanning to boost inflator production by more than 30 million units to about 100 million units by 2020as it wins new customers, according to the company. It’s adding production lines at plants in the U.S., China, Mexico and Europe and forecasts revenue will expand by 50 percent by the end of the decade.
GM, BMW AG, Volkswagen AG, Hyundai Motor Co. and Chinese automakers including SAIC Motor Corp. and Great Wall Motor Co. are amongKey Safety’s customers, according to Joyson’s annual report.
Buyout firms including Bain Capital PAG Asia Capital and KKR Co. were said to have expressed interest in Takata. The air-bag company and its adviser, Lazard Ltd. don’t plan to contact ZF-TRW and Autoliv because a deal may be difficult to pass due to antitrust concerns, Bloomberg reported earlier this month.
(Updates with GM recalls in eighth paragraph.)
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