Takata Files for Bankruptcy, Overwhelmed by Air Bag Issues

Japanese air bag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of defective air bag inflators linked to the deaths of at least 16 people.

The company announced the move Monday morning Tokyo time. Takata confirmed that most of its assets will be bought by rival Key Safety Systems, based in suburban Detroit, for about $1.6 billion (175 billion yen).

The company's executives sought to reassure their customers, suppliers and shareholders in a news conference on Monday. "As a group our company will continue to count on your understanding and cooperation as we endeavor to provide a stable supply of products," the company said in a statement.

Takata's inflators can explode with too much force when they fill up an air bag, spewing out shrapnel. Apart from the fatalities, they're also responsible for at least 180 injuries, and touched off the largest automotive recall in U.S. history. So far 100 million inflators have been recalled worldwide including 69 million in the U.S., affecting 42 million vehicles.

Under the agreement with Key, remnants of Takata's operations will continue to manufacture inflators to be used as replacement parts in recalls. The recalls, which are being handled by 19 affected automakers, will continue. Although Takata will use part of the sale proceeds to reimburse the automakers, experts say the companies still must fund a significant portion of the recalls themselves.

"It's likely every automaker involved in this recall will have to subsidize the process because the value of Takata's assets isn't enough to cover the costs of this recall," said Karl Brauer, executive publisher of Kelley Blue Book and Autotrader.

Takata and the automakers were slow to address the problem with the inflators despite reports of deaths and injuries. Eventually they were forced to...

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