Takata bankruptcy: What about consumer lawsuits?

Japanese auto parts giant Takata's bankruptcy may frustrate the legal challenges of victims harmed by the company's exploding airbags, which were part of the largest auto safety recall ever.

The US has been by far the hardest hit by the scandal over the defective airbags - which in some cases exploded with deadly force and are tied to 11 deaths on US soil out of the 16 recorded worldwide.

Of the 100 million airbags involved in the recall, some 70 million were sold in the United States.

25 US plaintiffs

So it's not surprising to see such a large amount of litigation against Takata in US courts. The Japanese company, which announced the bankruptcy on Sunday, pleaded guilty to fraud in January.

It is also in the United States that the bankruptcy by the world's number two airbag maker - whose assets will be bought up by US-based Key Safety Systems - creates the most uncertainty.

"Takata chose a cowardly way to escape its responsibilities. They'll eventually be held accountable, but there will be a significant delay," said Kevin Dean, a lawyer representing 25 plaintiffs in the United States.

For those injured and the families of those killed, the major question is what happens to their legal cases while a bankruptcy court sorts through competing claims from Takata's creditors.

For now, Takata has set aside $125-million to compensate the victims and pledged again on Monday to honour that commitment, which it made in January as part of its guilty plea.

But this could fall far short of the total liabilities, estimated at more than $1 billion.

"We will continue fighting for our clients and prosecuting claims against . . . Takata, to make sure all affected consumers receive the recourse they deserve," Peter Prieto, a lead attorney for the plaintiffs, told AFP in an email.

Suing a dead company

But Michael Duffy, an attorney who specializes in catastrophic personal injury, said this was unlikely.

"There won't be enough money to cover the costs," he said.

The price of shares in the company, which has debts of nearly $9 billion, will not suffer. KSS has snapped them up for $1.5 billion.

But finances are not the only issue. The bankruptcy process will leave Takata completely reorganised, complicating the work of the attorneys.

"It will impact my ability to represent the claimants," said Dean.

In addition, he said he will not be able to contact witnesses while the cases were on hold, so "there's a risk related to the preservation of evidence".

With Takata is shielded by bankruptcy law, the burden could fall on automakers themselves, who stand accused of knowingly installing defective airbags.

Car makers are already facing the massive task of replacing all the potentially defective airbags still on the road at their own cost, which Takata must supply. This process, overseen by the National Highway Traffic Safety Administration, appears not to be threatened by the bankruptcy.

"We've worked hard to act quickly, proactively and responsibly in addressing the Takata airbag recall for all impacted customers, and we will continue to do so," Toyota USA told AFP.

According to NHTSA, Takata has promised the agency to meet its obligations under the recall.

But the bankruptcy could mean the major automakers will find the airbag producer will not reimburse them for their costs, despite an $875 million fund created by Takata in January.

Takata's largest client, Honda, has already signalled it doesn't expect to recover its considerable expenses.

Other possible liabilities are pending as well. In May, several major automakers, including Toyota and BMW, had to pay out $553 million in the United States to compensate consumers whose cars had been outfitted with Takata airbags. - Nampa/AFP