Defective Airbags Prompt Takata Bankruptcy

Santa Clara, CATakata, the Japanese maker of defective airbags that have been recalled by the millions, has filed for bankruptcy. Defective Takata airbags have been linked to 11 deaths in the US.

Takata’s debt is estimated to be more than $9 billion, CNNMoney reports, causing it to seek bankruptcy protection in Japan and the US. However, it not expected that the bankruptcy filings will disrupt the massive airbag recall.

Earlier this year, Takata pled guilty to withholding information about the defective airbags and agreed to pay $1 billion to settle multi-district litigation in the US, alleging it sold the airbags anyway. The $1 billion included a $125 million fund to compensate victims and their families.

Further, the National Highway Traffic Safety Administration (NJTSA) levied a $200 million fine on Takata, its largest ever. As part of that deal, Takata admitted that it failed to tell the agency about the defect despite the fact that it was aware and withheld important information. According to the NHTSA, at that time the exploding airbag inflators were responsible for some 98 injuries.

A Chinese-owned company based in Michigan, Key Safety Systems, is reportedly paying $1.6 billion for nearly all of Takata's operations. However, it will not get involved the airbag inflators, which will eventually be wound down, CNNMoney reports.

Takata stock plunged more than 65% last week following reports that its bankruptcy filing was imminent. On Monday, it shares were suspended because they're going to be delisted, the Tokyo Stock Exchange said.

Major automakers including Honda, Toyota, and GM, who used Takata airbags in their cars, could also be out of pocket, following the Takata bankruptcy filing, as they're likely to have to cover most of the estimated $5 billion that's needed to pay for replacing tens of millions of Takata airbag inflators still in people's vehicles in the US and globally.

Currently, only 35 percent of vehicles with Takata airbags have had their inflators replaced, which CNN reports. This means that it could take until 2023 to make all the affected vehicles safe.