TOKYO, June 26 (Xinhua) -- Japan's embattled Takata Corp. said on Monday that it had filed for bankruptcy protection and would sell its business to a U.S. third party, in what is the biggest corporate failure ever of a Japanese manufacturer.
Liabilities of the Tokyo-headquartered firm currently stand at an estimated 1 trillion yen (9 billion U.S. dollars), owing to the tens of millions of high-profile global recalls by automakers since 2008 of Takata's defective airbag inflators, which can spray lethal shrapnel inside the vehicle when deployed.
The faulty airbag inflators have been linked to at least 11 fatal cases in the United States and led to 42 million cars being recalled as a result, marking the biggest ever car recall in the automotive industry.
U.S. auto parts maker Key Safety Systems Inc., however, has put in an offer to buy the struggling firm, the majority of its assets and its subsidiaries, including its seatbelt and child seat businesses, for 175 billion yen, providing the firm with enough liquidity to continue to meet client orders and avoid hefty layoffs from its workforce.
Key Safety Systems Inc. is owned by Chinese company Ningbo Joyson Electronic Corp. and the sale is expected to be completed by 2018. Its inflators will still be produced through March 2020, informed sources confirmed Monday.
At a press conference held in Tokyo, Takata Chairman and CEO Shigehisa Takada apologized to those who had helped bankroll the company until now and said he will step down once the new deal is finalized with Key Safety Systems Inc.
"To all our creditors and those who have supported us thus far, I apologize from the bottom of my heart," Takada said.
"It was difficult to reach an agreement with automakers and our sponsor," Takada added. "Meanwhile, the terms of business with our suppliers worsened, while at the same time we faced a human resources drain. We were running out of funding and there was a risk that we wouldn't be able to continue supplying products," Takada said with regards to filing for bankruptcy.
The firm had initially been seeking a turnaround plan that was not court mandated, but both automakers and Key Safety Systems Inc. insisted on the court's involvement to ensure the highest amount of transparency possible.
Such a plan now involves Sumitomo Mitsui Banking Corp. providing Takata with a bridge loan of up to 25 billion yen, while Takata's U.S. subsidiary TK Holdings Inc. has also filed for Chapter 11 bankruptcy protection.
After Takata's bankruptcy filing, its shares will be delisted from the Tokyo Stock Exchange on July 27.
Takata Corp. in May reported a full-year group net loss of 79.59 billion yen (698.80 million U.S. dollars), marking its third consecutive year of red ink, and booked a special loss of 132.98 billion yen owing to costs connected to the global recall.
The global recall, the biggest-ever faced by the auto industry, follows a number of fatal airbag inflator ruptures, which saw the auto parts maker in February plead guilty to a U.S. felony charge related to the recalls.
The settlement of around 1 billion U.S. dollars included compensation for the victims of the faulty airbag inflators, and the mounting recall costs of which have also been shouldered by Takata's clients including automakers such as Honda Motor Co., Volkswagen AG and Toyota Motor Corp.
The recalls began in 2008 and are expected to cost the embattled maker in the region of 10 billion U.S. dollars, according to industry sources familiar with the matter.
In fiscal 2016, Takata's operating profit dropped 7.5 percent to 38.96 billion yen, on sales of 662.53 billion yen, down 7.7 percent, it said.
Takata has said its liabilities totaled 380 billion yen as of the end of March, but according to Tokyo Shoko Research Ltd., a credit reporting agency, its liabilities will balloon to 1.7 trillion yen when recall costs that have been shouldered by automakers are factored in.
Toyota Motor Corp., for its part, has said it is not sure whether it will be able to receive the 570 billion yen in recall fees owed by Takata. Similarly, Honda Motor Co., has expressed concerns about collecting around 556 billion yen in outstanding recall-related fees.
Hiroshige Seko, minister of economy, trade and industry, told a press conference Monday that he had instructed his ministry to establish a "safety net" as Takata's bankruptcy will adversely affect a number of small- and medium-sized enterprises (SMEs) beyond the auto industry that rely on Takata.
Tokyo Shoko Research said that more than 130 companies in the country serve as tier 1 suppliers to Takata.
Seko said he hopes that Key Safety Systems Inc. will fix Takata's battered finances and that he "expects a quick turnaround."