Takata files for bankruptcy, overwhelmed by air bag recalls

Visitors view displays of Japanese autoparts maker Takata Corp. at a car showroom in Tokyo in this file photo. (AFP / KAZUHIRO NOGI)
Updated 26 June 2017
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Takata files for bankruptcy, overwhelmed by air bag recalls

TOKYO: Japanese air bag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the US, overwhelmed by lawsuits and recall costs related to its production of defective air bag inflators that are linked to the death of at least 16 people.
The company announced the expected action Monday morning Tokyo time. Takata confirmed that most of its assets will be bought by rival Key Safety Systems, based in suburban Detroit, for about $1.6 billion (175 billion yen).
Takata’s inflators can explode with too much force when they fill up an air bag, spewing out shrapnel. Besides the fatalities, they’re also responsible for at least 180 injuries, and touched off the largest automotive recall in US history. So far 100 million inflators have been recalled worldwide including 69 million in the US, affecting 42 million vehicles.
Under the agreement with Key, remnants of Takata’s operations will continue to manufacture inflators to be used as replacement parts in recalls. The recalls, which are being handled by 19 affected automakers, will continue. Although Takata will use part of the sale proceeds to reimburse the automakers, experts say the companies still must fund a significant portion of the recalls themselves.
“It’s likely every automaker involved in this recall will have to subsidize the process because the value of Takata’s assets isn’t enough to cover the costs of this recall,” said Karl Brauer, executive publisher of Kelley Blue Book and Autotrader.
Takata and the automakers were slow to address the problem with the inflators despite reports of deaths and injuries. Eventually they were forced to recall tens of millions of vehicles. Because of the size of the recall, some car owners face lengthy waits for replacement parts, meanwhile operating their cars worried that the air bag could malfunction in a crash.
US lawmakers have criticized the pace of the recalls. At the end of April, only 22 percent of the 69 million recalled inflators in the US had been replaced, leaving almost 54 million on the roads, according to the National Highway Traffic Safety Administration website.
The defect in the inflators stems from use of the explosive chemical ammonium nitrate in the inflators to deploy air bags in a crash. The chemical can deteriorate when exposed to hot and humid air and burn too fast, blowing apart a metal canister.
At least $1 billion from the sale to Key is expected to be used to satisfy Takata’s settlement of criminal charges in the US for concealing problems with the inflators. Of that amount, $850 million goes to automakers to cover their costs of the recalls. Takata already has paid $125 million into a fund for victims and a $25 million fine to the US Justice Department.
Attorneys for those injured by the inflators worry that $125 million won’t be enough to fairly compensate victims, many of whom have serious facial injuries from metal shrapnel. One 26-year-old plaintiff will never be able to smile due to nerve damage, his attorney says.
The lead attorney for people suing the automakers said in a statement following the announcement that he doesn’t expect the bankruptcy to affect the pending claims against the companies. Settlement agreements with Toyota, Subaru, BMW and Mazda already have won preliminary court approval, Peter Prieto noted.
That settlement will speed the removal of faulty inflators from 15.8 million vehicles and compensate consumers for economic losses, he said. Claims are continuing against Honda, Ford, Nissan and Takata.
Fallout from the bankruptcy filing came swiftly from the Tokyo Stock Exchange, which said it was stripping the company founded in 1933 from trading as of Tuesday.
Key, a Chinese company with international operations, makes inflators, seat belts and crash sensors for the auto industry. It is owned by China’s Ningbo Joyson Electronic Corp. Its global headquarters and US technical center is in Sterling Heights, Michigan.
Key also said it won’t cut any Takata jobs or close any of Takata’s facilities.
The Takata corporate name may not live on after the bankruptcy. The company says on its website that its products have kept people safe, and it apologizes for problems caused by the faulty inflators. “We hope the day will come when the word ‘Takata’ becomes synonymous with ‘safety,’” the website says.
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AP Business Writer Elaine Kurtenbach in Tokyo contributed to this report.


UK core pay growth strongest in nearly 11 years, but jobs growth slows

Data showed the unemployment rate remained at 3.8 percent as expected. (Shutterstock)
Updated 16 July 2019
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UK core pay growth strongest in nearly 11 years, but jobs growth slows

  • Core earnings have increased by 3.6 percent annually, beating the median forecast of 3.5 percent
  • The unemployment rate fell by 51,000 to just under 1.3 million

LONDON: British wages, excluding bonuses, rose at their fastest pace in more than a decade in the three months to May, official data showed, but there were some signs that the labor market might be weakening. Core earnings rose by an annual 3.6 percent, beating the median forecast of 3.5 percent in a Reuters poll of economists. Including bonuses, pay growth also picked up to 3.4 percent from 3.2 percent, stronger than the 3.1 percent forecast in the poll. Britain’s labor market has been a silver lining for the economy since the Brexit vote in June 2016, something many economists attribute to employers preferring to hire workers that they can later lay off over making longer-term commitments to investment. The pick-up in pay has been noted by the Bank of England which says it might need to raise interest rates in response, assuming Britain can avoid a no-deal Brexit. Tuesday’s data showed the unemployment rate remained at 3.8 percent as expected, its joint-lowest since the three months to January 1975. The number of people out of work fell by 51,000 to just under 1.3 million. But the growth in employment slowed to 28,000, the weakest increase since the three months to August last year and vacancies fell to their lowest level in more than a year. Some recent surveys of companies have suggested employers are turning more cautious about hiring as Britain approaches its new Brexit deadline of Oct. 31. Both the contenders to be prime minister say they would leave the EU without a transition deal if necessary. A survey published last week showed that companies were more worried about Brexit than at any time since the decision to leave the European Union and they planned to reduce investment and hiring. “The labor market continues to be strong,” ONS statistician Matt Hughes said. “Regular pay is growing at its fastest rate for nearly 11 years in cash terms and its quickest for over three years after taking account of inflation.” The BoE said in May it expected wage growth of 3 percent at the end of this year.