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Business

What to expect after Takata's bankruptcy filings

An explainer on the air bag maker's second life

| Japan

TOKYO -- Takata's turnaround involving the sale of core operations to a sponsor is much like a dissolution. Here are some key facts to know now that the Tokyo-based air bag manufacturer has filed for bankruptcy protection in Japan and the U.S.

Q: What happens with restitution to individuals and automakers in the U.S., which suffered numerous fatalities linked to Takata air bag inflators?

A: Under a January plea agreement with the Department of Justice, Takata has created a $125 million fund for personal injury claimants. The agreement also provides for an $850 million fund to compensate automakers. For the latter fund, Takata will use a portion of the roughly 175 billion yen ($1.56 billion) in proceeds from selling the operations.

Q: Who will be on the hook when air bags already installed deploy improperly in Japan?

A: In principle, automakers will have to respond and be liable. Key Safety Systems, the U.S. autoparts maker taking over the business, says Takata is responsible. But with the Japanese company's wherewithal diminished, automakers will end up shouldering the burden and so are considering setting aside reserves to absorb the shock.

Q: What about the reserve funds set aside by automakers to cover recall costs?

A: Automakers will report recall and other costs to the court as claims. Payments will be made based on repayment rates to be set in a Takata turnaround plan being drawn up. But many automakers expect most of the money to be uncollectible.

Q: Takata is still making replacement parts. Are they safe?

A: Takata currently makes air bag inflators with desiccant, which is said to keep the inflator propellant from degrading over time. The company supplies replacement parts to automakers at cost.

No problems have been reported with versions containing desiccant, and the authorities in both Japan and the U.S. have not included them in the recalls. But the American auto safety agency warns that it will if Takata does not establish the safety of the desiccant-using products by the end of 2019. If even these so-called desiccated versions must be recalled, automakers would face 800 billion yen in additional costs.

(Nikkei)

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