Japanese safety systems manufacturer Takata has filed for Chapter 11 bankruptcy protection in the United States and for bankruptcy in Japan, in the latest development in the world’s largest automotive safety recall, according to Automotive News.

To recap, batches of Takata’s airbag inflators were found to be defective and deployed with too much force, sending metal shrapnel into the cabin. It has been linked to 16 deaths and 180 injuries worldwide, including several in Malaysia.

With increasing liabilities while financing is falling apart, Takata had no choice but to sell its assets for cash, said Takata CEO Shigehisa Takada. Proceeds from the sale will go towards paying down the liabilities. Its key assets will be sold to American systems supplier, Key Safety Systems for US$1.59 billion (RM6.82 billion).

“We spent much time on negotiations, it was extremely difficult to reach an agreement with more than 10 carmakers worldwide and a sponsor candidate company. If things are left as is, we are aware of risks that we may not able to raise fund and to continue stable supply of products,” he said.

The total amount of liabilities is still unclear, and the auto parts supplier is in talks with automakers to tally a global cost, sad Takata attorney Nobuaki Kobayashi. Some analysts have pegged Takata’s total liabilities at US$10 billion (RM42.89 billion) including recalls, penalties and settlements, while another report from Tokyo Shoko Research put the liabilities at 1.7 trillion yen (RM64.3 billion).

Takata will also receive US$227 million (RM973 million) from its main lender, Sumitumo Mitsui Banking Corporation in the form of debtor-in-possession financing, the report said. Meanwhile, the auto parts supplier agreed to establish two independently administered restitution funds in as part of its US settlement.

One is for U$850 million (RM3.6 billion) to compensate automakers for the recalls, and another for US125 million (RM536 million) for individuals physically injured by the defective airbags who have not reached a settlement with the company.

The report also added that some 17 automakers including Honda, Toyota and BMW were listed as unsecured creditors with claims relating to recalls and indemnification. Additional, yet-to-be estimated litigation claims include class-action plaintiffs from the US, Canada and the attorney-general of the US Virgin Islands, while the NHTSA has a US$180 million (RM772 million) claim in fines and penalties.

“Key Safety Systems is the ideal sponsor as we address the costs related to airbag inflator recalls, and an optimal partner to the company’s customers, suppliers and employees. Throughout this process, our top priorities have been providing a steady supply of products to our valued customers, including replacement parts for recalls, and a stable home for our exceptional employees. This agreement would allow that to continue,” Takada said in a statement.

Takada also said he would step down after a new management takes over, which is expected to be reappointed at the company’s annual shareholders’ meeting in order to help smooth the transfer under Key Safety.