It also faces billions in lawsuits and recall-related costs to its clients, including Honda Motor Co, BMW, Toyota Motor Corp and others which have been paying recall costs to date.
Faulty air-bag inflators made by the 84-year-old Japanese company have been linked to at least 17 deaths and more than 180 injuries around the world. The ammonium nitrate compound used in the airbags can become volatile with age and prolonged exposure to heat, causing the safety devices to explode.
Global transport authorities have ordered about 100 million inflators to be recalled, a process that has dragged on for nearly a decade. Industry sources have said that recall costs could climb to about $10 billion.
Costs so far have pushed the company into the red for the past three years, and it has been forced to sell subsidiaries to pay fines and other liabilities.
As a result, the company has seen its liabilities shoot up to 397.8 billion yen as of March, while it posted 30 billion yen in net assets, down sharply from about 160 billion yen five years ago.
Industry sources say Takata would be able to complete the current global recall under bankruptcy, but could face problems if further recalls are required down the line. It has sought help from rival suppliers including Sweden’s Autoliv Inc to produce replacement inflators.
It also faces potential liabilities stemming from class action lawsuits in the United States, Canada and other countries.
Earlier this year, Takata pleaded guilty to a criminal charge of falsifying data on its inflator defects, agreeing to pay a $1 billion fine.
Founded as a textiles company in 1933, Takata began producing airbags in 1987 and at its peak became the world’s No. 2 producer of the safety products. It also produces one-third of all seatbelts used in vehicles sold globally, along with childseats, steering wheel systems and other components.
CEO and Chairman Shigehisa Takada, the bookish grandson of the company’s founder, has been criticised for his handling of the recall crisis. He has promised to resign after a new management team takes over.
(Reporting by Naomi Tajitsu in Tokyo, Additional reporting by David Shepardson on Washington D.C.; Editing by William Mallard and Stephen Coates)