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A component used in Takata air bags.
Business

Toyota, Nissan and co to support Takata recovery

Air bag maker will stop producing components that led to its downfall

TOKYO -- Honda Motor, Toyota Motor and Nissan Motor will continue to financially support Takata after it files for bankruptcy protection here as early as Monday, in an effort to contain any loss of confidence in Japan's autoparts industry.

The country's three largest automakers, together with smaller players like Subaru and Mitsubishi Motors, had informed the embattled air bag maker by Thursday that they would continue doing business with it based on existing contracts. They are also expected to speed up payment of accounts receivable to help Takata maintain its cash flow.

Honda has issued the most recalls of defective Takata air bag inflators among Japanese automakers, topping more than 50 million units, according to Tokyo-based Nakanishi Research Institute. Toyota and Nissan rank next. 

To secure working capital for its recovery, Takata will request several hundred million dollars in bridge loans from Sumitomo Mitsui Banking Corp. and its other lenders. A continued relationship with automakers would bolster Takata's chances of securing the funds.

Takata controls about 20% of the global markets for air bags and seat belts. It plans to provide further explanation soon to both domestic and overseas suppliers regarding the assistance it will receive from automakers.

The Tokyo-based company also plans to exit the market for air bag inflators, the target of mass ongoing recalls and the reason for its current financial woes, after fulfilling existing orders. Certain Takata inflators used ammonium nitrate as a propellant. The cheap, powerful compound can deteriorate when exposed to moisture for extended periods of time, creating the risk of shrapnel-spraying explosions during air bag deployment. Takata is believed to be the last air bag maker to use ammonium nitrate.

The inflator operations are to be excluded from U.S.-based Key Safety Systems' proposed takeover of Takata's parts businesses. The American autoparts maker and prospective Takata sponsor is owned by China's Ningbo Joyson Electronic. Key Safety would instead procure inflators from another supplier.

Takata has about 570 domestic suppliers, according to Teikoku Databank. Many are smaller companies, with 36.4% reporting total sales of under 1 billion yen ($8.98 million). There were concerns that Takata's bankruptcy filing could lead to credit problems for the suppliers.

(Nikkei)

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