Last week, Japanese auto parts manufacturer Takata filed Chapter 11 bankruptcy in the U.S. and Japan. The filing comes as Takata reached a $1.6 billion deal with U.S. manufacturer Key Safety Systems to acquire its main assets. This bankruptcy will make it the biggest Japanese postwar corporate failure for the manufacturing industry.
The filing comes after 8 years of recalls on Takata’s faulty airbag inflators, with more than 15 deaths and 180 injuries worldwide. Although the company has worked to recall and replace the faulty inflators, the bankruptcy and buyout by Key Safety Systems, a smaller airbag manufacturer, is what will allow them to continue providing replacements. Because Takata faced a severe situation, they weren’t able to wait any longer to file, said Shigehisa Takada, the company’s chairman and CEO.
Key Safety Systems is headquartered in Sterling Heights, MI—the home of Takata’s U.S. headquarters. Key’s parent company, Ningbo Joyson Electronic, is a Chinese automotive conglomerate who bought the company last year and has 32 plants and technical centers worldwide. Key Safety Systems will acquire most of Takata’s assets, keeping operations going for the replacement airbag inflators. They will maintain the same employees as part of the buyout deal as well.
The $1.6 billion buyout may not be enough to cover the total cost of the recalls. This recall is the largest in U.S. history, covering more than 42 million vehicles. Automakers were prepared for Takata’s inability to cover the costs of the recalls, but were more concerned about them continuing to produce the replacement airbags. The recall could cost up to $5 billion dollars and take up to 4 years to complete.
The team of Key Safety Systems and Ningbo Joyson Electronics have annual sales of more than $3 billion, which doesn’t include what will be gained from acquiring assets from Takata.
Once the judgment for bankruptcy is finalized and the transfer to Key Safety Systems has taken place, Takada says the top management at Takata will step down.