Report: Takata readying possible bankruptcy filing

Japanese auto supplier Takata is reportedly readying a potential bankruptcy filing after a crushing scandal that sapped its finances, triggered the largest automotive recall in U.S. history and spawned fines and investigations.

Takata's exploding air bag scandal has cast a cloud of uncertainty over the company, whose Michigan-based subsidiary TK Holdings is said to be weighing a Chapter 11 bankruptcy filing, according to Japanese newspaper Nikkei.

The company is still pursuing an "out-of-court reorganization" to "ensure its parts-supplying operations remain ongoing," Nikkei reported Thursday.

But the outlet reported that Takata's biggest customer, Honda, as well as Japanese automaker Toyota and other customers are "believed to be leaning in favor" of bankruptcy.

Takata has been conducting negotiations with its key customers in a bid to share the steep costs associated with the largest automotive recall of all time.

The company is responsible for recalls of 84 million air bags in the U.S., Canada and Japan, according to an August earnings statement.

The defective air bags — which can explode in a collision, hurling fiery shrapnel into passengers — have killed more than a dozen people and injured more than 100.

Asked for comment on the possibility of bankruptcy, Takata released a statement saying that is continuing its efforts to address the costs connected to the recall.

"The primary collective goal is assessing all bids and reaching a resolution that is in the best interests of all our stakeholders while promoting public safety and enabling Takata to remain a viable and valued global supplier to the automotive industry," the company said Thursday. "While this effort is ongoing, Takata continues to conduct normal day-to-day operations and to meet our obligations to suppliers on a timely basis, such as ensuring there is a steady supply of replacement inflators in support of the recall."

Honda spokesperson Jayme Robinson said in an email: "We are carefully monitoring the matter. But this is Takata's management issue and we refrain from making comments."

A Toyota spokesperson did not immediately respond to a request for comment.

Virtually all major automakers are affected by the recall in some capacity. By some estimates, nearly one-quarter of all vehicles on the road in the U.S. could be subject to the recall.

In a deal with the National Highway Traffic Safety Administration, Takata replace the defective air bag inflators in five phases through December 2019. The company agreed to pay at least $70 million in penalties and up to $200 million for failing to promptly fix the vehicles or report the defect.

Takata acknowledged in August that the scandal "may cast significant doubt upon the company's viability as a going concern."

On Oct. 11, Takata acknowledged that it had formed a committee to explore restructuring options, though it did not confirm similar reports that it was weighing bankruptcy. Several firms, including air bag manufacturer Autoliv and private-equity firm Bain Capital, are said to be proposing bids for Takata that could include a bankruptcy restructuring, although private-equity firm KKR has withdrawn from the process, according to Reuters.

Takata Corp. reported a 6.6% decline in net sales in the quarter ended June 30 to $1.6 billion based on today's currency rates. Net income fell 32.9% to $20 million.


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