Takata Corp, based in Japan, the company that is at the center of the biggest ever recall of a product in the auto industry, on Monday filed for bankruptcy protection in both Japan and the United States saying it would be acquired by Key Safety Systems based in the U.S. for $1.6 billion.
In the largest bankruptcy of a manufacturer based in Japan, Takata is facing costs as well as liabilities in the tens of billions of dollars resulting from nearly a decade of recalls followed by lawsuits.
Takata’s airbags are linked to a minimum of 17 deaths around the world.
Its operations in the U.S., TK Holdings on Sunday filed Chapter 11 listing its liabilities of between $10 billion and $50 billion, while its parent in Japan filed on Monday in Tokyo.
Total liabilities for Takata were 1.7 trillion yen or $15 billion, said one Japanese research firm on Monday.
Its final liabilities will depend upon the outcome of the talks with its carmaker customers that have been hit with the majority of the replacement costs, said a company lawyer.
The filings for bankruptcy open a door to be rescued financially by Key Safety Systems, a parts supplier based in Michigan and owned by Ningbo Joyson Electronic based in China.
The deal took over 16 months to be reached. KSS had agreed to take over the viable operations of Takata, while the other operations will go under reorganization to continue making millions of airbag replacement inflators, said the two companies in a joint statement.
The company in the U.S. would maintain nearly all of the 60,000 employees at Takata in 23 nations and keep its factories open in Japan.
The deal is aimed at allowing Takata to continue operations without any interruptions and having a minimal number of disruptions to its important supply chain.
Takata’s CEO Shigehisa Takada through a prepared statement said the company believes that the actions taken in the U.S. and Japan are the best means to address the current ongoing liabilities and costs of the issues arising from the airbag inflator in an organized way.
Takada added that he and his top management would be resigning when the restructuring has been set up. His family, which holds control of the company that opened over 8 decades ago, will likely no longer be shareholders.
CEO and president of KSS, Jason Luo said through a statement that Takata’s underlying strength in its business did not diminish.