Takata Buyers Mull Over GM Bankruptcy Protection against Liabilities

by San Antonio Attorney

Takata Corp.  is likely to file for bankruptcy in the United States.  Interested bidders are carefully considering a U.S.  court ruling that would possibly expose a purchaser to the legal responsibilities for the Japanese company’s faulty air bags, according to reports.

The company may have to face billions of dollars in damages from the largest recall in the automotive industry, arising from its manufactured air bags that were built with defective inflators.

Takata has announced that it is trying to find a financial sponsor.  But potential buyers, in the event company will be auctioned, prefers that Takata puts its U.S.  unit into bankruptcy first, the reports said.

In general, the bankruptcy law in the United States allows a potential buyer to purchase assets without legal liabilities, and the company being sold utilizes the money to pay back its creditors.

General Motors had the same approach when it sought for Chapter 11 protection in 2009.  GM immediately looked for buyers of its valuable assets to a purported “new General Motors,” shed billions of dollars in obligations to creditors, which allowed the company to weather the storm.

In October, Takata received five bids with proposals that include filing a General Motor-style of bankruptcy case.

The company’s creditors include automobile manufacturers who want to recoup the costs of the recalls.  Also, they may require getting a share of any payment to Takata’s assets.

According to bankruptcy lawyers, automobile manufacturers could also attempt to employ the tools of bankruptcy to shield themselves from legal actions by car owners for the defective air bags.

Takata’s air bags are made up of a chemical compound that can blow up with extreme force after extended exposure to hot temperature and have allegedly caused about 16 deaths.  An estimated 100 million air bag inflators made by Takata have been classified as substandard, leading to massive safety recalls.

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