Japanese automakers brace for Takata bankruptcy

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TOKYO—Japanese automakers say they are ready to deal with Takata bankruptcy Corp.

whose airbags susceptible to rupture are being recalled worldwide.

Takata is preparing to file for bankruptcy protection in the United States and Japan as early as next week, according to a person familiar with the matter. The auto parts supplier is facing an $850 million payout to automakers, as part of a settlement for a criminal investigation by the US Department of Justice. Takata posted a loss of 79.5 billion yen ($716 million) for the year that ended in March and warned that its liabilities exceeded the value of its current assets.

Automakers are covering recall costs for millions of vehicles worldwide, including 42 million in the United States alone, that contain airbags linked to at least 16 deaths and more than 100 injuries. The companies say the impact of a Takata bankruptcy on operations and balance sheets will likely be mitigated as they have had time to account for damages.

“We have enough parts to replace the recalled airbags,” said a spokeswoman for Honda Motor Co., Takata’s largest customer. Honda set aside 556 billion yen for recall-related costs over two years, fueling losses at a time when its peers were enjoying record profits thanks to strong U.S. car sales and a weak yen.

A Takata spokesperson said the company does not have the capacity to produce parts to replace all defective airbags. “We fulfill the orders we receive from automakers each month,” a Takata spokesperson said.

Honda has diversified its supplier base, and its new vehicle airbags no longer contain Takata-made inflators, the source of the recalled airbag problem.

Toyota engine Corp.

said it was working with suppliers to ensure it had an adequate number of spare parts. The company no longer uses the type of inflator that detonated Takata airbags, but it will continue to use Takata as a supplier “if they meet safety requirements,” a company spokesperson said.

In May, Toyota, Subaru Corp.

and Mazda Motor Corp.

with BMW HER

reached a $550 million settlement with owners and lessees of vehicles with defective airbags.

Nissan said it was working to replace faulty inflators as quickly as possible and was working with other suppliers to ensure it had enough to meet future demand.

Much of the new business moved to Autoliv Inc.

from Sweden. The company has won around half of all available airbag inflator orders over the past two fiscal years and expects to deliver up to 30 million by 2018.

Takata is in the midst of acquisition talks with smaller rival Key Safety Systems Inc., and the deal is expected to be announced at the same time as the bankruptcy, although a deal has yet to be finalized. Autoliv, another potential bidder, is no longer in the running.

Write to Sean McLain at [email protected]

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