Takata Corp. has succumbed to the financial pressures of the largest automotive recall in history, filing for bankruptcy and selling key assets to U.S. supplier Key Safety Systems for $1.59 billion.
The Japanese company had been struggling to fund the recall of more than 100 milion airbags that contain ammonim nitrate inflators, which can explode and hurl tiny bits of shrapnel-like metal into the passenger compartment.
Eleven deaths have been attributed to the faulty inflators in the U.S. and the death toll is likely to continue rising, as many millions of the defective inflators have remained in service, while Takata has struggled to manufacture enough replacement parts.
Both Key and Takata said the bankruptcy and asset sale would enable a reorganized Takata to complete its part of the recall campaign, estimated to cost at least $8 billion. In the meantime, consumers are powerless to do anything about the time bombs in their dashboards. Without parts, dealers can't perform the recalls and it is illegal for service centers to disable airbags.
Feds tried to speed things up
The National Highway Traffic Safety Administration (NHTSA) has repeatedly said it was taking action to speed up the course of the repairs.
Last December, NHTSA issued an order that set deadlines for when automakers must have replacement parts available for customers.
“NHTSA is doing everything possible to make sure that there are no more preventable injuries or deaths because of these dangerous airbag inflators,” said then-NHTSA Administrator Dr. Mark Rosekind. “All vehicle owners should regularly check their vehicles for recalls at SaferCar.gov and go get them fixed at no cost as soon as replacement parts are available.”
Key Safety, based in Sterling Heights, Mich, said the remaining recalls would be run by a reorganized Takata and will eventually be completed, although it did not specify a timetable. Many automakers have switched to competing airbag manufacturers to supply them with replacement airbags.
“Takata has deep management talent, a dedicated work force and a long history of exceptional customer service," said Jason Luo, president of Key Safety Systems. "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 has not diminished."
The companies said the transaction "is intended to minimize supply chain disruption concerns for Takata’s OEM customers," ensuring that the recall effort is completed in a timely manner.
The bankruptcy filing lists unsecured creditors including 17 automakers, including Honda, Toyota and BMW, as unsecured creditors, along with NHTSA, which is owed $180 million in fines and penalties, and the hundreds of plaintiffs who have filed individual and class-action lawsuits against Takata.