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Airbag maker Takata bankruptcy filing expected in Japan, U.S.

Published Jun. 26, 2017

DETROIT — Japanese airbag 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 faulty air bag inflators.

The company announced the action this morning, Tokyo time. Takata confirmed that most of its assets will be bought by rival Key Safety Systems, based in suburban Detroit.

Takata was done in by defective inflators that can explode with too much force when they fill up an air bag, spewing out shrapnel. They're responsible for at least 16 deaths and 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.

Rival Key Safety Systems near Detroit will buy most of Takata's assets for $1.6 billion and take over its manufacturing operations to make seat belts, airbags and other automotive safety devices.

Some remnants of Takata will be folded into an entity with a different name to keep manufacturing inflators used as replacement parts in recalls.

The recalls, which are being handled by 19 affected automakers, will continue. At the end of April, only 22 percent of the 69 million recalled inflators in the U.S. had been replaced under the recalls, leaving almost 54 million on the roads, according to the National Highway Traffic Safety Administration website. This means more inflators will likely explode and more people will be hurt in the future, lawyers say.

At least $1 billion from the sale will be used to satisfy Takata's settlement of criminal charges in the U.S. for concealing problems with the inflators. It was unclear what the rest of money paid by Key will be used for. Key is owned by Ningbo Joyson Electronic Corp. of China.

Key will reportedly get Takata's assets "free and clear" of past or future liabilities. That makes it unclear whether anyone injured by inflators in the future would have any legal recourse against either company.

Takata's troubles stem from use of the explosive chemical ammonium nitrate in the inflators to deploy airbags in a crash. The chemical can deteriorate when exposed to hot and humid air and burn too fast, blowing apart a metal canister.

In February, Takata pleaded guilty to fraud and agreed to the $1 billion settlement. Lawyers acknowledged in court that the company would have to be sold to fund the settlement. Automakers would get $850 million in restitution for recall costs and a $25 million fine would be paid to the government. Takata already has paid $125 million into a fund for victims.

Attorneys for those injured by the inflators worry that $125 million won't be enough to fairly compensate victims, many of whom have serious facial injuries from metal shrapnel.