Japan’s Takata Corp has finally filed for bankruptcy protection in both the United States and its home country of Japan. The bankruptcy filing comes in the midst of the largest product recall issued by the company in the automotive industry. The Takata brand will now be bought by Key Safety Systems, a U.S.-based company, for $1.6 billion.

Takata itself owes debts of tens of billions of dollars after years of product liabilities and recalls issued by the company. In fact, its faulty air bags have caused the death of at least 17 people around the world.

The company had been facing tough times for a long period following lawsuits and faulty products.

Takata Corp files for Chapter 11 bankruptcy

TK Holdings, the U.S. cell of the organization filed for Chapter 11 Bankruptcy on Sunday, June 25, in Delaware. The company currently has liabilities around $10 billion to roughly $50 billion. Its parent company also followed suit and filed for protection on Monday, June 26. Tokyo Shoko Research Ltd. Estimated that currently, Takata’s liabilities stand at somewhere around $15 billion.

However, the final liabilities will depend on the customers of Takata who have had to bear the cost of repairs for many of its products. Key Safety Systems or KSS will take over the company now and try to improve the reputation of the same.

Michigan-based KSS is a parts supplier and is owned by Ningbo Joyson Electronic Corp.

Terms of the takeover

It took 16 months for Takata to reach this conclusion, and according to the deal, KSS will take over the production and handling of the recall and replacement of the airbag infiltrators. It will also keep most of the 60,000 workforces across 23 countries around the globe along with the Japanese factories to maximize the production.

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KSS also revealed that Takata would maintain its supply chain as well.

CEO of the company, Shigehisa Takata, said that these steps would eventually be beneficial to the company. He indicated that after the deal does go through, he will step down as the chief executive followed by his top management. His family will also most likely stop being stockholders for the company, which was built 84 years ago.

At this juncture, Takata Corp faces billions in liabilities as a result of its large scale air bags recall, which affected its clients Honda Motor Corp, Toyota Motor Corp., and BMW along with many others. Apart from these, the car part supplier also faces several class action lawsuits from users of its product.

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