Air bag maker Takata Corp., facing an estimated ¥1.7 trillion in liabilities, filed Monday for bankruptcy protection under the Civil Rehabilitation Law in what is expected to be Japan’s biggest postwar bankruptcy involving a manufacturer.

The request was immediately accepted by the Tokyo District Court, which issued an order to protect Takata’s assets from creditors, the company said.

Takata has suffered from massive recall costs due to faulty air bag products that reportedly have been linked to at least 17 deaths worldwide. The inflators of the air bags can explode with excessive force and blow a metal canister apart, sending shrapnel into the passenger compartment.

Takata’s 12 overseas subsidiaries, including Michigan-based TK Holdings Inc., also filed for bankruptcy under Chapter 11 procedures in the United States, Takata said.

U.S. air bag maker Key Safety Systems Inc. will sponsor Takata’s reconstruction under the corporate rehabilitation law, the Tokyo-based company said.

Key Safety Systems, based in Michigan and owned by China’s Ningbo Joyson Electronic Corp., has agreed to buy up all of Takata’s business for ¥175 billion, Takata said.

“We will try to rebuild our business with support of Key Safety Systems Inc., which was recommended as a sponsor candidate by an outside expert committee,” Takata said in a statement posted on its website.

Later Monday, credit rating agency Tokyo Shoko Research Ltd. said it estimated Takata’s total liabilities at ¥1.7 trillion, including ¥1.3 trillion in recall costs that have been temporarily covered by major automakers.

Toyota Motor Corp. said that due to faulty Takata air bags, it has recalled 27 million vehicles worldwide and has spent ¥570 billion in recall costs.

Honda Motor Co. said it has paid ¥556 billion over the past two years to cover recall costs, and “most of that money is now expected to become unrecoverable.”

Takata was initially seeking private out-of-court negotiations with creditors to draw up a corporate rehabilitation program because the firm’s top priority was to avoid disruption of its operations so it could continue to supply safety equipment, Takata Chairman and CEO Shigehisa Takada said during a news conference in Tokyo.

“If we stop supplying safety equipment, it would have a huge impact on the entire automobile industry,” Takada said.

But Takata ultimately found it difficult to forge agreements with the necessary parties, and financial institutions hardened their lending terms for Takata. This forced the company to file for bankruptcy procedures in Japan and the U.S., Takada said.

He also stressed that banks have agreed to provide operating cash to support the firm’s rehabilitation.

“Now that we have no worries about cash management, we believe we can maintain a stable supply” of auto safety parts, he said.

The 1999 Civil Rehabilitation Law was enacted to create quick court-led bankruptcy protection to help a company recover, possibly with a sponsoring company.

Under the law, the management team of the bankrupt firm does not need to leave the company after applying for protection.

Takada said he will step down “at an appropriate time,” probably after all parties formally agree to the rehabilitation plan and all of Takata’s operations are transferred to Key Safety Systems.

Meanwhile, damage to the operations of Japanese automakers may be limited as they have plenty of alternative channels, including overseas suppliers, to procure auto parts, said Noriyuki Kobayashi, an auto industry consultant at Nomura Research Institute Ltd.

Even so, carmakers could still be affected in other ways, Kobayashi said.

“I think working with Japan-based parts maker has made it easier for domestic carmakers to develop new, advanced technologies,” he said. “I think having to do business with foreign-invested suppliers could make that a bit harder.”

Kobayashi further said that Japanese automakers may not have stepped forward to become Takata’s sponsors because they wanted to avoid having their reputations tarnished through capital ties with the ailing parts maker.

“Mexico and the United States are among the largest cash cows for Japanese automakers,” he said. “I think the credibility of Japanese manufacturers in those areas could have been damaged” by the fall of the once-respected auto parts maker.

Kobayashi said, even though Takata says it will continue to supply safety equipment, the company’s tarnished brand image might keep domestic automakers away from choosing Takata products over those of other parts makers.

Takata was established by the Takada family in 1933 in Hikone, Shiga Prefecture, and started producing air bags in the 1980s.

The family still holds about 60 percent of outstanding shares, but will be “impossible” to remain a major shareholder during the bankruptcy process, Takada said.

Takata employed 50,530 group workers as of March last year and had 54 plants in 21 countries as of September.

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