monday, 26 june of 2017

Japanese airbag maker Takata files for bankruptcy

Takata, the Japanese automotive supplier at the centre of a global recall of exploding airbags, has filed for bankruptcy protection in Japan and the US, saddled with liabilities exceeding $10bn to address massive recall costs.

The move paves the way for a $1.6bn takeover of Takata’s core assets by Key Safety Systems, a US airbag manufacturer owned by China’s Ningbo Joyson Electronic, bringing to an end the 84-year-old company that developed Japan’s first driver-side airbag system in the 1980s with Honda.

Takata’s bankruptcy filing leaves the global car industry grappling with the implementation and financial costs of completing an unprecedented recall process involving tens of millions of vehicles sold by at least 13 carmakers including Honda, Toyota and Volkswagen.

Questions about possible defects with Takata’s airbag inflators, which are prone to exploding in humid conditions, emerged in 2008. The safety crisis intensified in the spring of 2013 after Toyota, Honda, Nissan and Mazda recalled more than 3m vehicles worldwide, citing problems with passenger-side airbag inflators.

Its faulty airbag inflators have been linked to at least 17 deaths and more than 100 injuries, triggering a huge recall that ultimately could affect more than 100 more vehicles types sold by at least 13 carmakers from around the world. Only about a third of the recalls have been completed so far.

Takata has faced sharp criticism from consumers and carmakers for its handling of the safety crisis. In 2015, Honda, the company’s largest customer, accused it of manipulating test results on certain airbag inflators, and several carmakers followed Honda’s decision to stop using Takata’s inflators in new vehicles.

The safety scandal has weighed heavily on Takata’s finances. The company reported a net loss of ¥79.6bn ($715m) for the year to March, marking its third year in the red.

Analysts say it remains uncertain how much carmakers will shoulder in new recall costs if Takata does not have sufficient financial assets to complete the process in the wake of its bankruptcy filing.

Shares in Takata were suspended on Monday, after closing at ¥160 on Friday. They will be delisted on July 27.

In January, Takata pleaded guilty to fraud and agreed to pay $1bn in criminal penalties in the US with three of its executives indicted for their roles in the safety scandal. The $1bn payment included $850m to cover recall costs borne by vehicle makers.

People close to the talks say discussions about the future of Takata dragged on for nearly a year as the company’s founding family members pushed for an out-of-court restructuring agreement with carmakers.

In February, Takata said a steering committee of outside experts, commissioned by the company, had recommended KSS as the preferred financial sponsor. Under the agreement reached with KSS on Monday, the Chinese-owned group will acquire all of Takata’s assets excluding the airbag inflator business affected by the safety scandal.

“Although Takata has been impacted by the global airbag recall, the underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat belts and other safety products have not diminished,” Jason Luo, KSS’s chief executive officer, said in a statement.

Tokyo-based Takata started out in 1933 as a textile manufacturer. Initially making parachutes for the military and then seat belts, the company eventually moved into airbags in the 1980s. Through a series of acquisitions from the late 1980s, it grew into one of the world’s three largest airbag manufacturers, with annual revenues of Y662bn — 37 per cent of which is made from airbags sales.

(Published by Financial Times - June 25, 2017)

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