To strike a deal to take over the air bag maker at the heart of the auto industry’s biggest safety recall, potential rescuers of Japan’s Takata Corp have extended talks, already in their 14th month reported the media.
the preferred bidder for Takata, whose faulty air bags have been blamed for at least 16 deaths worldwide are car-parts maker Key Safety Systems Inc (KSS) and Bain Capital LLC.
Reuters reports that to oversee the search for a financial sponsor, automaker clients, suitors and bankers are now likely to run on until at least end-May, the airbag maker had tapped a steering committee and the discussions include the steering committee.
Issues such as an indemnity agreement to cover reimbursement costs for air bag recalls, estimated to be as high as $10 billion, were the focus of the recent talks that were described by two participants as “chaotic”.
still conducting due diligence are Bain, a U.S. private equity fund and KSS, a U.S.-based maker of air bags, seatbelts and steering wheels.
Plans to offer around 200 billion yen ($1.8 billion) for Takata are being made by KSS – which was bought last year by China’s Ningbo Joyson Electronic Corp – and Bain, sources reportedly said.
There were no comments made to media enquiries by a spokesman for Takata and the steering committee. A spokeswoman for KSS also declined to comment.
Through a transparent court-ordered process such as bankruptcy, which would wipe out the firm’s shareholder value, automakers including Honda Motor Co, which have been footing the bill for recalls dating back to 2008, want Takata restructured, reported Reuters
“There’s no other option,” said one automaker executives to reuters. “A privately arranged restructuring would require them to repay billions. They can’t afford that.” But a “private restructuring” that would preserve some of the founding Takada family’s 60 percent stake is what Takata, the world’s second-biggest air bag maker, is holding out for.
Since the recall crisis began escalating in early 2014, Takata stock has cratered 90 percent and the clock is ticking for the company. The potential for Takata to collapse if it couldn’t find a buyer was cited by U.S. federal Judge George Steeh in February.
Its inflators, which can explode with excessive force, blasting shrapnel into passenger areas, conceded Takata as it pleaded guilty in Steeh’s District Court to a felony charge as part of a $1 billion settlement with automakers and victims.
The company is also trying to settle legal liabilities in the United States, where it faces a class-action lawsuit, and other countries where its air bag inflators have exploded
Speculations that it would have to seek some form of bankruptcy protection from creditors in the United States or Japan, have been denied by Takata.
Though some automakers have switched to rival suppliers, the auto industry needs it to keep producing the millions of inflators needed to replace recalled air bags and hence the company has not been allowed to simply disappear.
Also, in a global industry dominated by just three companies, the government in Tokyo is keen to preserve a major Japanese maker of air bags.
(Adapted from Reuters)