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Takata Settles Air-Bag Claims to Clear Way Out of Bankruptcy

Updated on
  • Company files court papers outlining deals with creditors
  • Deal comes just before final bankruptcy court showdown

Takata Corp.’s U.S. operations, pushed into bankruptcy by the largest automotive recall in U.S. history, settled with two groups representing victims of its faulty air bags, the company said in court documents.

Two committees for people suing over the air bags have agreed to support a bankruptcy-exit plan that would resolve lawsuits by channeling them into a trust funded in part by the sale of Takata assets.

Takata has recalled millions of air bags that had been linked to deaths in the U.S. Defective air bags can explode in car crashes, sending metal shards flying. Japan-based Takata entered a guilty plea last year as part of a $1 billion settlement with the U.S. Justice Department over the air-bag problems.

On Tuesday, the company is scheduled to seek final approval of its reorganization plan, which is built on a sale and setting up a trust to handle air-bag claims. The two groups representing the air-bag plaintiffs have agreed to drop their opposition to the plan, according to court documents.

Under the reorganization plan, Takata and any automakers that have agreed to join it, such as Honda Motor Co., would be protected from lawsuits related to faulty air bags. Instead, the trust would face the claims, similar to the way asbestos lawsuits are handled in bankruptcy.

The two main groups formed to represent current and future air-bag victims were among the last major parties still fighting the reorganization plan. When Takata returns to court Tuesday, it will still face a handful of objections, though the company will likely try to resolve as many of those as it can before the hearing starts.

Jared Levy, an outside spokesman for Takata with New York-based Sard Verbinnen & Co., didn’t immediately return a call and an email Sunday seeking comment on the settlement.

The bankruptcy case is TK Holdings Inc., 17-11375, U.S. Bankruptcy, District of Delaware (Wilmington).

— With assistance by Jef Feeley, and Katherine Chiglinsky

(Updates with lawsuit protection for automakers in the fifth paragraph.)
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