Liabilities of the Tokyo-headquartered firm now stand at an estimated 1 trillion yen (9 billion USA dollars), owing to the tens of millions of high-profile global recalls by automakers since 2008 of Takata's defective airbag inflators, which can spray lethal shrapnel inside the vehicle when deployed.
The Reuters news agency reports that Takata's USA operations filed Chapter 11 bankruptcy in DE on Sunday with liabilities of $10 billion to $50 billion.
It also faces billions in lawsuits and recall-related costs to its clients, including Honda Motor Co (7267.T), BMW (BMWG.DE), Toyota Motor Corp (7203.T) and others which have been paying recall costs to date.
Takata will separate its healthy business units, including its seat belt and child seat operations, into a new company that Key Safety will buy for ¥175 billion.
Three independent reports concluded that the chemical Takata uses to inflate its air bags - ammonium nitrate - can degrade after long-term exposure to environmental moisture and high temperatures.
"Because there is so much work to be done, there is a real concern that there won't be enough money to complete all these recalls and therefore the auto manufacturers themselves will have to pick up most of the costs".
It is facing billions of dollars in liabilities over its defective air bags, which have been linked to at least 17 deaths worldwide. The buyer of these assets is Key Safety Systems, a Chinese company that operates out of MI.
On the Tokyo Stock Exchange, trading in Takata shares was suspended Monday, before its de-listing on 27 July.
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.
Toyota has recalled over six million vehicles, while Mazda, FIAT and Ford are also involved in the operation, the largest safety recall in the automobile sector's history.
Nissan does not disclose whether it continues to use Takata inflators but said it has established new supply lines for the component and is working with alternative suppliers to "develop new inflators for prompt rollout in future vehicles". In some cases, airbags were fitted with a faulty inflation system, which expanded too rapidly, often resulting in metal shrapnel being shot at passengers.
2000: Takata executives Shinichi Tanaka, Hideo Nakajima and Tsuneo Chikaraishi realize that the air bags can rupture but they don't inform automakers. But it's staying away from the parts that deal with the airbag inflators, which will eventually be wound down.
The vehicle parts maker has been in the midst of a global recall involving exploding airbags and listed liabilities topping $10bn over its defective airbags.
As of May 26, only 38 percent of the air bag inflators under recall in the U.S. had been repaired, according to data on the U.S. Department of Transportation's National Highway Traffic Safety Administration website. Takata's management plans to resign once the "timing of the restructuring is set", a statement from the company revealed.
The penalty includes a $25m criminal fine, a $125m compensation fund for victims, and an $850m restitution fund for carmakers.
"Filing for bankruptcy is going to protect Takata financially, but it's not going to protect drivers who have been injured or are going to be injured", Morrison said.
Takata will essentially be divided into two companies.
It said it would continue talks with the supplier but anticipated difficulties in recovering the bulk of its claims.
Takata's debts have spiraled to an estimated $9 billion due to the massive recall program for defective airbags supplied to nearly two dozen automakers and used in an estimated 100 million vehicles across the globe.