Monday, June 26, 2017

Takata files for bankruptcy in air-bag recall scandal.

USA Today (6/25, Jones, Bomey, 5.28M) reports Japanese airbag manufacturer Takata filed for bankruptcy protection on Sunday, as it faces “massive costs associated with defective air bags.” The piece provides a timeline of the company’s problems, beginning in the 1990s with the production of “air-bag inflators with ammonium nitrate propellant,” that by 2000 they knew were not properly functioning. In 2009, the National Highway Traffic Safety Administration launched an investigation into a recall issued by Honda over defective airbags. By 2012, US regulators found that “Takata ‘failed to clarify inaccurate information’ on the air bags.”
        In its own more recent timeline of Takata’s air-bag trouble, Bloomberg News (6/25, 2.41M) reports that in 2014, the NHTSA added an additional 3 million cars to recalls already initiated by Honda, Toyota and Nissan. In 2016, the NHTSA “order[ed] Takata to replace as many as 40 million additional air bags,” not long after which the company agreed “to plead guilty and pay $1 billion in the U.S. to settle an investigation.”
        Takata’s bankruptcy trouble “isn’t just a crisis for its employees and suppliers,” but “also throws a wild card into one of the biggest and most complicated recalls in automotive history,” Bloomberg News (6/25, Buckland, Horie, Beene, 2.41M) says. The piece indicates the company’s “filing to restructure, which listed more than $10 billion in liabilities, doesn’t relieve a manufacturer of recall responsibilities,” but that carmakers may be left footing the cost if its financial assets are exhausted “before all the work is done.” According to the NHTSA, “only 38 percent of the 43 million air bag inflators under recall in the U.S. had been repaired as of May 26.”
        The company has said that it intends to “sell key assets to U.S. supplier Key Safety Systems,” Automotive News (6/25, Walsh, 188K) reports. Separately, Key Safety said that “it would buy ‘substantially all’ of Takata’s global assets and operations for $1.59 billion.” However, this would “not include some operations related to Takata’s business in the ammonium nitrate airbag inflators” that have been the subject of the global recall. According to Key Safety, Takata will reorganize its ammonium nitrate airbag inflator operations, which will eventually be wound down.

        Similarly, USA Today (6/25, Krisher, 5.28M) reports that “some remnants of Takata will be folded into an entity with a different name to keep manufacturing inflators used as replacement parts in recalls,” according to those briefed on the matter who did not want to be identified. The piece says that $1 billion from the sale “will be used to satisfy Takata’s settlement of criminal charges in the U.S.” What the rest of the money will be used for is still unclear. 

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