Takata Considers Chapter 11 Bankruptcy for American Unit

by San Antonio Attorney

Takata Corp. is contemplating about filing bankruptcy for its unit in the United States, as the automotive parts manufacturer looks for a backer to help them pay for the costs caused by its defective inflators.

The Japanese air bag maker has been aiming to select a financial sponsor for its reorganization as it deals with enormous liabilities arising from the worldwide recall of millions of possibly defective inflators.  The company has hired financial advisory firm Lazard Ltd.  as a consultant for the process.

Takata is under pressure to provide replacement parts for the inflators, which have allegedly caused more than 16 fatalities worldwide, mostly in the U.S., and have resulted to the industry’s biggest recall to date, with almost 100 million inflators to be recalled internationally.

A Chapter 11 bankruptcy filing for its unit in America, TK Holdings in Michigan was an alternative it was taking into consideration although no petition was expected right away, according to reports.  TK Holdings brings in almost half of the company’s sales,

Filing for bankruptcy would not be in the offing since Takata still had to choose a sponsor and decide the terms, and settle a deal with creditors.

Takata has said again that it is eager to reach a deal with its clients outside of the bankruptcy court, preferably by the end of the year, even though it also mentioned that a steering company would eventually make the final decision, CFO Yoichiro Nomura said in a briefing with reports.
Nomura said an out-of-court settlement would be ideal to guarantee a steady provision of replacement parts for the inflators.

Interested entities for Takata include Daicel Corp from Japan and Autoliv from Sweden, according to reports.  The company’s creditors include Ford Motor Co., Nissan, and Honda Motor Co.

Takata’s profits are taking a hit because of the defective air bag recall.  Its share price has shrunk 90% within the last two years.

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