Takata, one of the world's leading air-bag manufacturers, recently hit the auction block, and a list of prominent bidders began to emerge.
So far, interested parties are mainly consisted of private-equity firms and manufacturers of car components. These include the Daicel Corp., which is working with Bain Capital, KKR & Co. and the Key Safety Systems Inc., which is a prominent air-bag manufacturer in China.
The bidders were asked to submit their respective proposals this week. The suitors will then be evaluated and will eventually be whittled down to two or three shortlisted candidates in October, according to a Bloomberg report.
Takata's auction, once concluded, will not be a simple affair. The process and the new ownership are expected to be scrutinized by car makers that use the Takata air-bag. Not only will the change impact the actual Takata operations, but it will also affect the ongoing recall for Takata air-bag inflators.
Takata is currently in the process of recalling this defective component, which is now attributed to several fatalities worldwide. This involves up to 70 million air-bag inflator replacements until 2019. The company is negotiating with its clients led by Honda Motor Co., particularly in regard to issues such as cost-sharing and possibly to cover the damages involving the flood of customer lawsuits.
"It may take time from now on given the need to reach agreement with various stakeholders," Shintaro Niimura, a credit analyst, said. "The Japanese carmakers, foreign carmakers, all have different interests."
Indeed, bidders will also be including their plans regarding the recall process as well as Takata's liability. Some are reportedly considering bankruptcy proceedings, which the current management has been avoiding.
It is important to note that Takata is also facing fines such as the $70 million penalty imposed by the National Traffic Safety Administration for its failure to disclose the air-bag defects. The Justice Department is also currently undergoing a criminal investigation concerning the issue.
The company has already initiated a restructuring plan early this year as it tries to make a turnaround. The plan involves the possibility of overhauling the department responsible for the air-bag manufacture. It has retained the services of Lazard, an investment bank, in a move to replenish its coffers and finance the initiative. The current auction is also primarily aimed at finding a buyer that can see the company through its current problems.
The details about the auction or the bid proposals are not yet clear, as both Takata and the reported bidders have not issued official statements.
Photo: Cesar I. Martins | Flickr
