Effects of Takata Bankruptcy to Extend Far and Wide

Effects of Takata Bankruptcy to Extend Far and Wide

- in Automotive

Will there be enough money for everyone?

In a word: no.

In its bankruptcy filing in the United States, Takata projected its liabilities at $10 billion to $50 billion, vastly more than it will have to give even after the infusion of cash from Key Safety Systems.

The huge range is because of major uncertainties: The recalls are only partially completed, and no one yet knows how much they will ultimately cost or how much victims might be awarded in lawsuits. Analysts believe the recalls alone will cost $10 billion or more.

Will recalled cars still be fixed?

Yes, according to Takata and the automakers.

Carmakers say they are committed to finishing the job, and Takata said on Monday that it would continue to manufacture replacement airbag inflaters until the process is finished, something it expects will happen by 2020.

The Airbag in Your Car Could Explode. This Is What You Should Do About It.

Defective airbags made by Takata have been tied to 11 deaths and more than 180 injuries in the United States alone. The ensuing recall — the largest in automotive history — has turned out to be messy, confusing and frustrating for car owners.

There is still a risk, however, that because defects only become apparent with the passage of time, more problems could come to light after Takata winds down.

If that happened, carmakers would have to deal with them without input from the original manufacturer, a potentially trickier task.

Who will be stuck with Takata’s bills?

Carmakers, for one. Major manufacturers including Honda, Toyota and Fiat Chrysler are among Takata’s biggest unsecured creditors, according to court documents.

Honda, Takata’s largest customer, summed it up on Monday when it warned shareholders that it would “become difficult to recover the majority of the claims” that the automaker holds against Takata, including costs of the recalls.

The silver lining is that carmakers have braced themselves for the blow by setting aside large reserves of cash to absorb recall costs.

Further afield, Takata’s banks in Japan may also be stuck with loans that have not been repaid, though how much remains is subject to negotiations and the decisions of Japanese courts.

Takata said on Monday that it remained committed to a promise it made to the United States government to pay $125 million in compensation to victims.

The outcomes of lawsuits are harder to gauge. Key Safety Systems, which is owned by a company in China, Ningbo Joyson Electronic Corporation, has sought to wall itself off from Takata’s legal problems by buying Takata’s assets, but not the company itself.

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