Takata Corp. filed for bankruptcy protection in the U.S. and Japan after faulty air-bags made by the company were linked to more than a dozen deaths and led to the biggest recall in automotive history.

The Chapter 11 bankruptcy in Delaware listed more than $10 billion in liabilities, including those from automakers like Honda Motor Co., Toyota Motor Corp. and Tesla Inc., which have claims over the air bags, and people who have brought class action lawsuits. Takata also made a filing in Japan. Key Safety Systems Inc., the U.S. air-bag maker owned by China’s Ningbo Joyson Electronic Corp., has agreed to buy Takata’s business for 175 billion ($1.6 billion), according to a statement posted on Takata’s website.

Takata’s products, which can malfunction sending shards of metal at drivers and passengers, have been linked to at least 17 deaths worldwide. When an air bag exploded in a Honda Accord in 2004, Takata called it an anomaly. Since then, regulators have expanded the recall more than 20 times to include millions of bags in more than a dozen automakers’ vehicles.

Seventeen different car makers, including Honda, Toyota and BMW were listed as unsecured creditors with unknown claims related to recalls and indemnification, according to the filing. Litigation claims, also un-estimated, included those from class action plaintiffs in the U.S. and Canada, and the attorney general of the U.S. Virgin Islands. The National Highway Traffic Safety Administration has an $180 million claim for fines and penalties.

The recalls, expected to cover more than 100 million air bags, and accidents spurred the filing of multiple lawsuits against Takata and the car companies using the air bags. They alleged personal injuries or deaths or economic losses.

In January, Takata admitted to hiding the deadly risks of its exploding air bags for about 15 years in an agreement to pay $1 billion to U.S. regulators, consumers and carmakers. The settlement included a $25 million criminal fine, $125 million in victim compensation and $850 million to compensate automakers who have suffered losses from massive recalls.

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Takata also reached settlements with some carmakers worth $553 million to resolve economic-loss claims tied to the company’s faulty products. Toyota, Subaru, Mazda and BMW will reimburse out-of-pocket expenses, provide loaners to some vehicle owners and set up an outreach program to increase participation in recalls, according to court papers filed May 18. Under the accords, any funds left over will be paid, up to $500 each, to vehicle owners or lessees. The settlement covers 15.8 million vehicles but doesn’t cover claims over personal injuries or deaths.

Shares and bonds of Takata -- whose products are used by carmakers including Honda Motor Co. and Ford Motor Co. -- have slumped as investors anticipated an imminent bankruptcy filing by the manufacturer of faulty air-bag inflators linked to at least 17 deaths worldwide. The Tokyo Stock Exchange suspended the stock from trading as of 8:20 a.m. in Tokyo.

In the U.S. alone, about 43 million air bag inflators are currently subject to recall, and only about 38 percent have been repaired as of May 26, according to data on the U.S. Department of Transportation’s National Highway Traffic Safety Administration’s website. In Japan, the recall affects close to 19 million vehicles and is 73 percent complete, a spokesman at the country’s transport ministry said this month.

The challenges for Takata’s acquirer will be manifold. The Japanese parts maker posted its third-straight annual loss even without including the full costs of repairing millions of air bags, which automakers are now paying for. It will have to stem an exodus of talent at Takata, even as it works to regain trust and demonstrate to automakers the process won’t result in disruption of supplies.

Japan Credit Rating Agency on June 20 cut Takata’s credit rating to the lowest level before default.

Even so, Key Safety, the world’s fourth-largest air-bag maker bought by Ningbo Joyson last year, would gain greater access to Japanese automakers and the combined entity would pull closer in market share to leader Autoliv Inc.

Takata’s biggest customer Honda first started recalling Accord and Civic models in 2008 to replace the supplier’s air bags. The company’s air-bag inflators used ammonium nitrate as a propellant that can be rendered unstable after long-term exposure to heat and humidity, leading them to rupture and spray metal shards at vehicle occupants. More than a dozen other automakers including Volkswagen AG, Toyota Motor Corp. and General Motors Co. have also recalled vehicles fitted with the Japanese company’s devices.
