The 84-year-old Tokyo-based vehicle parts giant is facing lawsuits and huge costs over an airbag defect linked to at least 16 deaths globally. In Japan, the recall affects close to 19 million vehicles and is 73 percent complete, a spokesman at the country's transport ministry said this month.
In fact, the last batch of US repairs is not scheduled to begin until September 2020, according to the National Highway Traffic Safety Administration, which is overseeing the recall.
Shares and bonds of Takata - whose products are used by carmakers including Honda Motor Co. and Ford Motor Co. - have slumped as investors anticipated an imminent bankruptcy filing by the manufacturer. Key Safety Systems and its owner, China's Ningbo Joyson Electronic Corp., should dig in for a long and costly fight.
For Takata, the decision to file for bankruptcy is a stunning fall from grace.
The $1.6bn (£1.3bn) deal was announced after the Japanese company filed for chapter 11 bankruptcy protection in the United States, with similar action taken in Japan.
Takata's bankruptcy is thought to be the largest ever by a Japanese manufacturing company.
Eleven deaths have been attributed to the faulty inflators in the USA and the death toll is likely to continue rising, as many millions of the defective inflators have remained in service, while Takata has struggled to manufacture enough replacement parts.
February 2004: Unidentified Takata executive admits to "manipulating" test data on air-bag inflators, according to the company's criminal settlement with the U.S. Justice Department.
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The company has admitted that its employees knew about the potential problems with its air bag inflators as early as 2000.
The AP reports that the $1.6 billion that Takata stands to make from its sale to KSS will be used to satisfy Takata's settlement of criminal charges with the USA government and reimburse automakers affected by the recall.
Jefferies Group LLC has put the total cost at ¥1.28 trillion ($11.5 billion), while Tokyo Shoko Research estimates ¥1.7 trillion; people familiar with the matter have told Bloomberg News that a worst-case scenario would run to $24 billion.
On top of this, the company agreed to pay US$125 million to a victims' compensation fund. Their replacements contain a drying agent to absorb excess moisture created by high temperatures, an idea Takata has come up with as a solution for the exploding airbags.
Takata's biggest customer, Honda, first started recalling Accord and Civic models in 2008 to replace the supplier's air bags.
Peter Prieto, a lawyer for consumer plaintiffs in the Takata air bag litigation, said in a statement that Honda had refused to present the engineer for a deposition.
The safety agency is also making sure older cars are fixed first, since the chemical Takata used in the air bags, ammonium nitrate, degrades over time, especially in hot, humid climates. Key Safety Systems said it would buy Takata's factories and other assets for about $US1.6 billion.