TOKYO -- Following protracted recalls involving its defective air bags, Japanese auto supplier Takata on Monday filed for bankruptcy protection in Japan and the U.S., leaving behind a massive debt and an unresolved crisis.
"We concluded that we would not be able to continue a stable supply of our products" unless we seek court protection from creditors," Chairman and President Shigehisa Takada said in a press conference, citing mounting concern about his company's financial viability and ongoing employee exodus.
Takada bowed deeply before the press, holding the position for about six seconds. "We apologize for all the trouble we have caused to all those who supported us and to our creditors," he said.
Takata leaves behind liabilities in excess of 1 trillion yen ($8.98 billion), including recall costs shouldered by automakers.
It was a rare public appearance by the embattled chairman since the recall crisis came to light in 2008.
That year, Honda Motor, the biggest user of Takata air bags, started recalling its vehicles, because the air bags could explode with too much force and spew out shrapnel.
Behind the problem was Takata's use of ammonium nitrate in the inflators of the air bags. The chemical compound can become unstable after long-term exposure to heat and humidity.
The 51-year-old chairman stood by his company's decision to put the product in the market. "We were confident when we put the product in the market."
He insisted the product had been put to rigorous tests before release, and judged safe to use.
But reports of air bag explosions started surfacing around 2009. Since then, more than a dozen deaths have been attributed to Takata air bags.
The company initially insisted the problems were due to human error during manufacturing, denying there were any fundamental defects. This delayed the recalls and sparked accusations that the company was attempting a cover-up.
"We were puzzled when we saw reports of explosions," Takada said in the press conference, acknowledging that the company was slow to come to terms with the problem.
Takata is now forced to replace some 100 million units around the world. But many are mounted on second-hand cars, whose owners are difficult to reach.
Takata has recalled only 36% of the defective air bags in the U.S. and about 73% in Japan.
The bankruptcy filing was made with the Tokyo District Court on Monday morning. Takata's U.S. subsidiary, TK Holdings, separately filed for chapter 11 bankruptcy protection with a court in the state of Delaware. Takata expects the bankruptcy procedures to be complete in the first quarter of 2018.
The company said its main creditor bank, Sumitomo Mitsui Banking Corp., has agreed to provide a line of credit for the company to help it restructure.
Takata announced that it has reached an agreement under which U.S. autoparts maker Key Safety Systems will take over most of the Japanese company's assets and operations for 175 billion yen ($1.588 billion). Takata will use the proceeds to compensate victims of the recall and to help repay automakers who have shouldered related costs.
Takada said he will step down from the board once the transfer of assets to Key Safety Systems is complete.
After the asset sale, Takata will continue producing replacement parts for its defective air bags through at least 2020, the company said.
Key Safety Systems is a subsidiary of China's Ningbo Joyson Electronic.
Following the bankruptcy decision, the Tokyo Stock Exchange halted trading of Takata's shares and said it will delist the company on Tuesday.
Hiroshige Seko, Japan's minister of economy, trade and industry, told reporters on Monday that Takata's bankruptcy filing was "inevitable." He said he expects "smooth coordination so as to prevent confusion from spreading in the parts market."
Takata aims to restructure under the civil rehabilitation law, which is designed to help distressed companies quickly reorganize before they fall into insolvency. It does this by allowing the court to issue an order to protect the debtor's assets from its creditors at an early stage. The law also allows the current managers to retain their posts so as to implement business rehabilitation measures.