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Air bag maker expected to file bankruptcy

Takata deals with lawsuits, recalls

DETROIT — Drowning in a sea of lawsuits and recall costs, Japanese air bag maker Takata is expected to seek bankruptcy protection in Tokyo and the United States early today.

Takata was done in by defective air bag inflators that can explode with too much force, spewing out shrapnel. They’re allegedly responsible for at least 16 deaths and 180 injuries and have touched off the largest automotive recall in U.S. history. So far 100 million inflators have been recalled worldwide.

Rival Key Safety Systems, based near Detroit, will buy most of Takata’s assets for $1.6 billion and take over its manufacturing operations to make seat belts, air bags and other automotive safety devices, according to those briefed on the matter.

Some remnants of Takata will be folded into an entity with a different name to keep manufacturing inflators used as replacement parts in recalls. The recalls, which are being handled by 19 automakers, will continue.

At the end of April, only 22 percent of the 69 million recalled inflators in the U.S. had been replaced under the recalls, leaving almost 54 million on the roads, according to the National Highway Traffic Safety Administration website. This means more inflators will likely explode and more people will be hurt in the future, lawyers say.

At least $1 billion from the sale will be used to satisfy Takata’s settlement of criminal charges in the U.S. for concealing problems with the inflators. It was unclear what the rest of money paid by Key will be used for. Key is owned by Ningbo Joyson Electronic Corp. of China.

One of the people briefed on the filings said that Key would get Takata’s assets “free and clear” of past or future liabilities. That makes it unclear whether anyone injured by inflators in the future would have any legal recourse against either company.

Takata’s troubles stem 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.

In February, Takata pleaded guilty to fraud and agreed to the $1 billion settlement. Lawyers acknowledged in court that the company would have to be sold to fund the settlement. Automakers would get $850 million in restitution for recall costs and a $25 million fine would be paid to the government. Takata already has paid $125 million into a fund for victims.

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