Recall-Hit Takata Files for Bankruptcy Protection

Tokyo, June 26 (Jiji Press)--Troubled air bag maker Takata Corp. <7312> on Monday filed with Tokyo District Court for bankruptcy protection under Japan's civil rehabilitation law, in the largest manufacturing business failure in postwar Japan. The court accepted the bankruptcy filing, decided at a meeting of Takata's board earlier on Monday. The Tokyo Stock Exchange said it will delist Takata shares on July 27. Including costs for its massive global recall of rupture-prone air bag inflators that have been provisionally shouldered by client automakers, Takata's liabilities are estimated to reach 1.7 trillion yen, the largest amount for any failed manufacturer in Japan since the end of World War II and the fifth largest on an all industry basis, according to Tokyo Shoko Research Ltd., a credit research firm. Takata will now work for a turnaround under court supervision and the sponsorship of Chinese-affiliated U.S. auto parts maker Key Safety Systems Inc. Takata said it has reached a basic agreement to sell most of its assets and operations to KSS for 1,588 million dollars, or 175 billion yen. The transaction is expected to make KSS a leading global automotive supplier operating in 23 countries with a workforce of about 60,000 people. The Japanese company will receive up to 25 billion yen in debtor-in-possession financing from Sumitomo Mitsui Banking Corp., a unit of Sumitomo Mitsui Financial Group Inc. <8316>, as well as separate financial support from related automakers. Two domestic subsidiaries of Takata made bankruptcy filings under the law, while 12 overseas units, including Michigan-based TK Holdings Inc., filed for Chapter 11 bankruptcy in the United States on Sunday local time. Takata aims to complete its rehabilitation process by June 2018. "We deeply apologize for causing great inconvenience to concerned people," Takata Chairman and Chief Executive Officer Shigehisa Takada, 51, from the company's founding family, told a press conference on Monday. He expressed his readiness to step down by the end of March 2018. Speaking to reporters, industry minister Hiroshige Seko called the bankruptcy filing "unavoidable" and urged the company to "prevent further confusion" in the market while working to "achieve a turnaround as soon as possible." Chief Cabinet Secretary Yoshihide Suga told a news conference that the industry ministry is considering financial assistance measures for small companies that will be affected by Takata's failure. Takata's current management initially sought out-of-court rehabilitation, but the company has been under pressure from client automakers to apply for a court-led rehabilitation process. Takata controls 20 pct of the global market for air bags and seat belts. Ruptures of defective Takata air bag inflators have killed 11 people in the United States and five in Malaysia. The number of inflators subject to the global recall is expected to top 100 million. END