Takata in crisis: another likely airbag death, a criminal probe, and bankruptcy in the works?

October 3, 2016

The past several years have been terrible for Takata. The company's deeply flawed airbags have been linked to more than a dozen deaths and over 100 injuries worldwide. Most of those incidents have occurred in the U.S. 

Last week, the company's woes worsened as we learned of yet another fatality that might be blamed on a Takata airbag; a criminal investigation of the company continued; and the Japanese supplier's quest to find a buyer hit a few snags. Here's a recap of those headlines:

Takata death toll may rise to 14

On September 24, a driver in Malaysia was killed in a collision, and on Wednesday, we learned that the driver's Takata airbag ruptured during deployment. As with most other fatalities of this nature, the motorist was behind the wheel of a Honda--formerly, Takata's biggest client.

The sadder news is, the car was recalled in June of 2015 to have its airbag inflators replaced. It appears that the owner(s) never took the vehicle in for service.

Investigators haven't conclusively linked the driver's death to the car's exploding airbag, and Honda notes that the type of inflator used in the car was never used in vehicles sold in the U.S. or Canada. However, the automaker does point out that at least one death in Malaysia has been linked to that particular style of airbag inflator.

Translation: it's a distinct possibility that the death will be conclusively linked to the car's Takata airbag. If so, it will mark the 14th such death since the crisis began.

Criminal probe begins in the U.S.

Meanwhile, on this side of the Pacific, the U.S. Department of Justice has confirmed that Takata broke the law in its handling of the airbag crisis. (This isn't especially surprising: back in July, an independent audit revealed that Takata had hidden details about its exploding airbags from regulators and clients.)

The DOJ is in talks with Takata to resolve the criminal charges. Expect the company to shell out a substantial fine at the very least.

Bidders offer to take over Takata, but there's a catch

For months, Takata has been desperately seeking a buyer to help it recover from the airbag fiasco, and as of last week, it had received five bids, each valued between $1 billion and $2 billion.

However, not all bids are created equal. Two of the company's potential new owners--Autoliv and Key Safety Systems--insist that Takata file for bankruptcy first. Doing so could potentially shield the restructured company and its new owners from lawsuits related to the airbags. (Although as we've seen with General Motors's Switchgate fiasco, that kind of plan isn't foolproof.)

Three other bids have been submitted by Daicel, Bain Capital, and the team of KKR & Co. and Flex-N-Gate. While those bids have all proposed bankruptcy as an important option, restructuring isn't a condition of the takeover, as it is for Autoliv and Key Safety Systems. That makes these three more attractive to Takata.

Ironically, the question of whether Takata will be forced to file for bankruptcy may depend on clients like GM and Volkswagen, both of whom have been/are embroiled in massive recall fiascoes of their own over the past couple of years. Though automakers haven't been exactly willing to support Takata during this crisis, doing so is in their best interests, since it ensures that the products Takata makes--including replacement airbags--continue flowing uninterrupted.

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