How Airbag Manufacturer Takata Filing for Chapter 11 Bankruptcy Impacts Your Case

Takata’s bankruptcy filings with Delaware and Tokyo courts signal the end to company crushed by debt related to defective airbag recalls and civil lawsuits. Some personal injury and accident lawyers fear that airbag injury victims may wind up receiving very little, if anything, after the pending sale of the company to a Chinese corporation.

The U.S. operating division of Japan’s Takata Corporation, T.K. Holdings, has filed a Chapter 11 (“reorganization”) bankruptcy petition with a Delaware federal court. Almost simultaneously, T.K. Holdings parent company, Takata Corporation, filed a petition asking for bankruptcy protection with a court in Tokyo. The filings are an admission that Takata officials believe the company’s current assets to debt ratio, and the prospect of even more future debt related to an ongoing worldwide recall of potentially defective airbags, are an indication that the company could not survive as it now exists.

In its Delaware filing, the company’s U.S. subsidiary said that it would be acquired by Sterling Heights, Michigan-based auto parts supplier Key Safety Systems for $1.59 billion. Key Safety Systems is the U.S. subsidiary of China’s Ningbo Joyson Electronic Corporation. Business analysts expect that a substantial portion of the purchase price will go toward settling a $1 billion fine owed the U.S. Department of Justice, while the bulk of the remaining purchase funds will probably be used to settle Takata’s debts to automakers that were forced to recall millions of automobiles and trucks to replace potentially deadly defective airbags manufactured by Takata over last two decades.

Legal and business analysts expect that if the bankruptcy petition is approved “as submitted” there will little left to settle pending civil defective product lawsuits or to fund reserves against future claims.


The Takada bankruptcy case, the largest bankruptcy filing of a Japanese manufacturing corporation in history, has several lessons that should be taken to heart by those who have suffered some type of personal injury and are undecided about filing a lawsuit or even undecided about discussing their potential case with an accident lawyer.

First, when a business files for Chapter 11 (reorganization) or a Chapter 7 (liquidation) bankruptcy, be it a subsidiary of a multinational corporation or a mom and pop bakery, the court with which the bankruptcy petition is filed will also issue what is known as an “automatic stay” of litigation. This means that you can no longer file a lawsuit a lawsuit against a company while that company’s bankruptcy petition is “in the pipeline” and the court has not issued its ruling. Furthermore, any lawsuit that has been filed is “stayed” and removed from the schedule of the court that would have heard the case.

Next, remember that we live in a world of multi-national corporations and multi-national jurisdictions. In today’s business environment, and thanks to international treaties and other such agreements, filing for bankruptcy protection in one country can often result in bankruptcy protection in other countries as well.

One point that could offer some hope to potential future plaintiffs in airbag injury lawsuits is that the Takata filing will have no effect on the pending, or any future, lawsuits filed against automakers such as Honda, General Motors, and Ford. Many yet to be filed lawsuits will probably allege that some automakers, particularly Honda and its worldwide subsidiaries, knew that there were safety issues with Takata’s products but were reluctant to order recalls of their vehicles due to the potential costs, as in millions if not billions of dollars, of such recalls.

In closing, the impact of the Takata bankruptcy filing on past and current defective product and personal injury lawsuits will be up to the courts in both the U.S. and Japan. The main takeaway points of interest are that, once a company files for bankruptcy, that company can no longer be sued in a U.S. court. Secondly, progress of any pending lawsuits is automatically stopped and any litigation related to pending cases is also placed on an indefinite hold. Lastly, anyone who believes that they have been the victim of personal injury that is related to a defective product should consult an accident lawyer as soon as possible lest they wait too long and find themselves with a damages award that is essentially worthless while a bankruptcy court spends a year or more in reaching its decisions.