Takata really, really, really wants to avoid bankruptcy

January 26, 2017

The long, international nightmare know as the Takata recall fiasco is far from over, and Takata itself is largely to blame for the delay.

Long after it became clear that the company had made a deadly mistake by using ammonium nitrate in its airbag inflators, the supplier remained defiant, hampering efforts to get to the root of the problem and recall the affected airbags.

Now, Takata is causing problems again. Over the past year, the troubled supplier has been shopping around for buyers who can help provide the estimated $10 billion it needs to dig itself out of this mess. Unfortunately, most of those potential buyers want the company to declare bankruptcy and restructure, but Takata is fighting those efforts tooth and nail.

The buyers are pushing for bankruptcy to protect their potential investments. If Takata restructures, investors in the "new" company will be shielded from problems caused by the "old" company. (Well, probably--though that plan hasn't worked so well for General Motors.)

Takata, on the other hand, says that going through bankruptcy would destroy stock value for its current shareholders (including those who work for the company). In other words, Takata wants to maintain value for current investors with little regard for the financial well-being of the future investors it's trying desperately to court. Anyone else see the problem in that?

Complicating matter is the fact that the financial markets are siding with Takata. In the two days since Takata began pushing back against calls for a court-mediated bankruptcy, its stock price has surged by 40 percent. The company is currently valued at $450 million. 

The question is: can Takata woo billions of dollars in new investments while safeguarding the value of existing ones? Money managers, feel free to weigh in below.

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