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Millions of Exploding Airbags Later, Auto Supplier Considering Bankruptcy

Bankruptcy Lawyer Bryan W. Stone answers the question: “What is Chapter 13 bankruptcy?”


It probably comes as no surprise that the automobile parts manufacturer responsible for what became the industry’s largest global recall is now reportedly considering a bankruptcy filing for its U.S. subsidiary.

Crash test dummies Charlotte Bankruptcy LawyerJapanese auto supplier Takata, whose exploding air bag scandal ballooned into the largest recall in U.S. history back in May, has now had to issue about 100 million recalls worldwide.

In the moment where drivers and passengers need them most, the defective air bags can explode in a collision, sending fiery shrapnel flying. The airbags have reportedly been linked to at least 16 deaths globally and have injured at least 100 people, most of them in the United States.

Effectively all major automakers have been affected by the recalls in some capacity. Some estimates put the number of vehicles affected in the U.S. alone at nearly one-quarter of all vehicles on the roads here.

The recall has led to hefty fines and investigations into Takata’s operations, taking a heavy toll on its finances. The company agreed earlier this year to pay at least $70 million in penalties for failing to report the defects or fix them promptly, and has since been struggling to supply the millions of replacement parts needed worldwide.

However, automakers have so far shouldered most of the up-front recall costs while hashing it out with Takata over how to divide ultimate responsibility for the recalls. If Takata were found solely responsible for the airbag defect, it could face a roughly $13 billion bill for the recalls completed thus far according to automakers and industry experts. The company is additionally facing recall-related lawsuits both in the U.S. and abroad.

The Japanese news outlet Nikkei has reported that Takata is attempting to reorganize its finances out of court first so that it can ensure the parts-supplying portion of its operations remains open. Takata is still searching for a sponsor to pay its liabilities related to the historic recall scandal, although these talks have been stymied by the report that the company’s Michigan-based subsidiary, TK Holdings, is considering bankruptcy.

TK Holdings accounted for over 30 percent of Takata’s group sales for the year ending this March.

Takata CFO Yoichiro Nomura told reporters the company would prefer an out-of-court settlement over a court-ordered bankruptcy. With the right sponsor and restructuring, the company might still be able to ensure a stable supply of the replacement parts needed in the recall.

However, the news outlet also reported that Honda, Takata’s biggest customer, and other Japanese automaker Toyota are believed to be in favor of Takata declaring bankruptcy.

After the Japanese news outlet reported that Takata was considering a bankruptcy filing, the parts manufacturer’s stock trading was temporarily halted.

Pinning down what exactly created the airbag defect mystified government scientists for months. They eventually concluded that the problem stemmed from conditions that affect the ammonium nitrate propellant the company used in the inflator mechanism in the airbags. According to tests by Takata and the government, the propellant is prone to degrading over time, especially in hot and humid climates.

To check and see if your car is one of the vehicles potentially impacted by the recall, go to your car’s maker’s website. Affected manufacturers allow users to search via VIN number to view open recalls on a particular vehicle.

If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.


About the Author

Kyle Frost Bankruptcy Lawyer Student loan attorneyKyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology.  He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.

Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.

In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.









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