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From textile maker to airbag giant, the rise and fall of Takata

Some things to know about Takata and why its defective airbags have been blamed for killing at least 16 people.

business Updated: Jun 26, 2017 11:06 IST
Visitors looking at displays of Japanese autoparts maker Takata Corp at a car showroom in Tokyo.
Visitors looking at displays of Japanese autoparts maker Takata Corp at a car showroom in Tokyo. (AFP file photo)

Takata filed for bankruptcy protection Monday and agreed to be bought by a US firm, signalling the end of the road for the Japanese airbag maker at the centre of the biggest-ever auto safety recall.

Here are a some things to know about the Tokyo-based firm and why its defective airbags have been blamed for killing at least 16 people:

What is Takata’s history?

Takata began life in 1933 as a family textile factory. Its founder Takezo Takada is the grandfather of chief executive Shigehisa Takada, who said on Monday he would resign over the affair.

Its original products included woven fabrics and nautical ropes. Over the decades Takata branched out, including selling seatbelts in the 1960s and, later, other auto safety equipment such as airbags.

By the 1980s, the firm had ballooned into a top global auto parts player on the back of Japan’s surging economic clout.

Takata employs about 46,000 people globally with 56 factories in 20 countries, including the United States, Mexico and China, with about 663 billion yen ($5.95 billion) in annual revenue.

Japanese air bag maker Takata Corp CEO Shigehisa Takada, second left, bows after a press conference in Tokyo on Monday. (AP)

How did the crisis start?

In 2000, the company started using a chemical, ammonium nitrate, as a propellant in its airbag inflators.

The problem is that the unstable chemical can degrade, especially in humid conditions. That creates the risk that Takata’s airbags will improperly inflate and rupture, firing metal and plastic shrapnel at the occupants of the car.

That has happened in numerous cases, resulting in scores of injuries and at least 16 deaths. Takata has been accused of hiding the problem for years.

Honda, a major Takata customer, first sounded the alarm in 2008 that there might be a problem. But the crisis reached a peak only in 2014 when earlier deaths started getting more media attention and the US National Highway Traffic Safety Administration got involved in the ballooning recalls.

How big is the recall?

In a word: huge.

Around 100 million airbags, including about 70 million in the United States, are subject to the massive recall. It has affected almost every major automaker, including Toyota and General Motors.

The scandal has hammered Takata’s once-thriving brand and put it in a tight spot as it faces probes, lawsuits and massive liabilities, estimated to exceed one trillion yen.

That would qualify it as the biggest post-war bankruptcy for a Japanese manufacturer, according to Tokyo Shoko Research.

Takata has already agreed to pay a billion-dollar fine to settle with US safety regulators over its airbags. But that is not the end of the legal or financial problems as recalls continue and Takata tries to reach settlements with its automaker clients.

What’s next?

On Monday, Takata said it has agreed to be bought by American auto parts maker Key Safety Systems (KSS), owned by China’s Ningbo Joyson Electronic, for about $1.58 billion.

Its new owner said there were no immediate plans to reduce Takata’s employee headcount or close factories, as it tries to keep the business stable for customers.

But Takata’s name is not likely to survive in the long term. Operations linked to the defective airbags will not become part of the combined company. They’ll be run by the reorganised Takata and eventually wound down.

Takata’s embattled shares, meanwhile, will be yanked off the Tokyo Stock Exchange next month.