Takata Surges After Reiterating It Wants to Avoid BankruptcyMa Jie and Masatsugu Horie
Reports of court-led rehabilitation ‘regrettable,’ it says
New Mexico sues Takata, 15 automakers for trade violations
Takata Corp. surged in Tokyo trading after the air-bag maker reiterated it wants to avoid a court-led bankruptcy that could disrupt the supply of parts needed to complete the biggest safety recall in automotive history.
The Tokyo-based manufacturer, whose faulty products are linked to at least 17 deaths worldwide and the subject of recalls that may exceed 100 million units, climbed 18 percent to 519 yen on Wednesday. The company said reports that assume it was moving toward a court-led rehabilitation were “regrettable” and causing confusion. The company is deciding on a direction that takes into account all stakeholders and discussions are ongoing, it said in a statement Tuesday.
“We are prioritizing the stable supply of parts in determining our restructuring,” Takata said in the statement. “It’ll be difficult to maintain the supply chain with a court-led bankruptcy procedure and may result in us being unable to fulfill our responsibility to supply parts. As a result, it may cause trouble to a wide range of stakeholders.”
Chief Financial Officer Yoichiro Nomura made similar comments in November that a court-led restructuring could disrupt the supply of parts to automakers. Takata’s comments on Tuesday come after its shares and bonds have plunged since reports that bidders for the air-bag maker are leaning toward bankruptcy for the company to shield them from liabilities.
While Takata needs a financial savior in order to help it pay penalties and compensation, prospective buyers have been reluctant to proceed without some assurance on the claims they face. Meanwhile, top customers like Honda Motor Co. have a vested interest in seeing an uninterrupted supply of replacement parts from Takata to complete millions of recalls, while potentially recouping costs from the supplier.
The web of competing interests has slowed down the search for a financial backer, with the expected completion of the sale pushed back several times. Due diligence by bidders including Autoliv Inc. and Key Safety Systems Inc. had to be extended in part because of the difficulty in calculating the potential liabilities, people with knowledge of the talks said last month. The auto parts maker has also agreed to pay $1 billion in a U.S. settlement.
The sale may be complicated by an accusation by Autoliv that Takata was blocking its Swedish rival supplier from the months-long auction process by withholding information, the Wall Street Journal reported, citing people it didn’t identify.
Autoliv has been seeking access to financial and recall data, and visits with Takata management. Takata’s Chief Executive Officer Shigehisa Takada has threatened to dismiss employees who provide Autoliv with information, the newspaper reported. The founding Takada family still owns more than half of the company through a family investment firm and direct stakes held by Shigehisa Takada and his mother, Akiko Takada.
Takata may name the buyer in February or March, people familiar with the talks said earlier this month. In its search for an investor, Takata has expressed concerns regulators could block an Autoliv takeover on antitrust grounds, according to the Journal.
Thomas Jonsson, a spokesman for Autoliv, declined to comment on the Takata auction process when contacted by Bloomberg News, while a representative for Takata couldn’t immediately be reached for comment.
Worldwide, the recalls may eventually cost 1 trillion yen ($8.8 billion), according to Jefferies Group LLC. Takata had 121.6 billion yen in capital at the end of September.
Separately, Takata and 15 automakers were sued by New Mexico’s attorney general for failing to protect consumers from exploding air bags. The carmakers sued include Honda, Ford Motor Co., General Motors and Toyota Motor Corp., according to the complaint in state court in Santa Fe. Takata spokesman Jared Levy on Tuesday declined to comment on the New Mexico lawsuit.
The case was filed a week after Takata agreed to pay $1 billion and to plead guilty to a fraud charge to settle a U.S. investigation over the air bags.