Monday, 24 September, 2018

Key Safety Systems To Buy Takata's Assets For $ 1.57 Billion

Key Safety Systems To Buy Takata's Assets For $ 1.57 Billion Key Safety Systems To Buy Takata's Assets For $ 1.57 Billion
Sherri Watson | 27 June, 2017, 07:32

Takata Corp., the Japanese manufacturer of faulty air bag inflators linked to the deaths of at least 16 people, has filed for bankruptcy protection in Tokyo and the USA following billions of dollars in liabilities linked to a massive global recall.

Japanese vehicle parts maker Takata has filed for bankruptcy protection in the U.S. and Japan. Takata has been heavily criticised for its role in handling the crisis and, despite the enormous number of recalls, it was recently forced to admit it did not know how many cars fitted with faulty airbags were still on the road.

The Reuters news agency reports that Takata's us operations filed Chapter 11 bankruptcy in DE on Sunday with liabilities of $10 billion to $50 billion. The stock will be delisted from the Tokyo bourse late next month.

Takata warned in bankruptcy documents that if it does not complete the restructuring by March and complete payments owed under the deal, the Justice Department could withdraw the plea agreement and seek higher penalties.

The filings have, however, not resolved all issues.

Takata is working with KSS on a final agreement to be released in the coming weeks.

Takata's assets are expected to be sold for $1.6 billion to a rival company, Key Safety Systems, and part of Takata will remain under a different name to make replacement inflators for the recalls.

The proposed transaction was meant to minimize transaction risk and supply chain disruption concerns for Takata's customers.

"Takata expects to continue to meet demand for airbag inflator replacements without interruption", Takata said in a statement.

Millions of airbags produced for some of the largest automakers, including Toyota and General Motors, are being recalled because of the risk that they could improperly inflate and rupture, potentially firing deadly shrapnel at the occupants. Industry sources have said that recall costs could climb to about $10 billion.

It also faces potential liabilities stemming from class action lawsuits in the United States, Canada and other countries. Takata is expected to use $1 billion of the proceeds to cover its settlement of criminal charges with USA authorities.

Takata began rapidly losing value while the company struggled to reorganize its finances. The firm also produces a third of all seatbelts used in vehicles globally and other components.

In a press conference on Monday, he apologised and promised to resign after a new management team takes over.

The filings open the door to the financial rescue by Key Safety Systems (KSS), a Michigan-based parts supplier owned by China's Ningbo Joyson Electronic Corp.

The $1.6bn (£1.3bn) deal was announced after the Japanese firm filed for chapter 11 bankruptcy protection in the U.S., with similar action taken in Japan.

Takata would keep operations of its affected inflators for now to continue supplying recall replacement parts, and would eventually wind down those operations, the two companies said in a statement.

Is lead by CEO Jason Luo, who has been with the company for 19 years.

"Although we have acquired the right to be reimbursed for the costs of both past and future recalls from Takata and its affiliates, following Takata's filing, it is likely that we will not be able to exercise this right in most cases", Nissan said in a filing with the Tokyo Stock Exchange. Indeed, the Detroit-based company will buy the majority of Takata's assets for $1.6 billion in addition to taking over its manufacturing operations. Daimler AG said its costs tied to the recall were 563 million euros last year, while the premium Audi brand, which represents parent Volkswagen AG's largest exposure to Takata, set aside 232 million euros (S$360.2 million) over the past two years.

Among other Japanese automakers, Subaru Corp announced it has about 73.5 billion yen in recall-related claims against the airbag maker for the period ended March 2017.

Takata will also receive a US$227 million lifeline from its main lender, Sumitomo Mitsui Banking Corporation, in the form of debtor- in-possession financing.

The defective airbags were linked to 16 deaths, including 11 in the United States. It started producing airbags in 1987, becoming the world's second producer of the safety products.