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Speaking of "Engineering Failures", Takata has declared bankruptcy...

Speaking of "Engineering Failures", Takata has declared bankruptcy...

Speaking of "Engineering Failures", Takata has declared bankruptcy...

(OP)
Now who will be responsible for replacing the remaining defective airbags? I read somewhere recently that only something like 40% or so of the defective airbags on the road in the US have been replaced and that the rest was waiting for replacement parts. Will those parts now be forthcoming and who will be paying for them?

Air-bag maker Takata files for bankruptcy protection

http://www.marketwatch.com/story/air-bag-maker-tak...

John R. Baker, P.E. (ret)
EX-Product 'Evangelist'
Irvine, CA
Siemens PLM:
UG/NX Museum:

The secret of life is not finding someone to live with
It's finding someone you can't live without

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Whew - My wife got her Honda CRV recall replacement done last month. Just in time!

STF

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

The makers of the cars have always been responsible for correcting safety defects in the cars. This will delay things because the safety testing that was done to begin with was passed with Takata inflators. I don't foresee automakers retesting all the models they tested before with a different inflator.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Takata declaring bankruptcy does not mean their operations cease to exist.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

"who will be responsible?"

The vehicle OEMs (e.g. Toyota, Honda, etc.) are the responsible parties.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

(OP)
Perhaps, but will the company that now owns the Takata assets be in a position to provide the replacement parts or not? And even if the OEM's have final responsibility, they would still have been expected to get some sort of relief from Takata, first in terms of the replacement parts themselves and then with respect to any monetary relief in terms of the lawsuits that have, or will yet be filed, by the injured parties or their families, to say nothing of potential legal action by the OEM's themselves agasint Takata.

John R. Baker, P.E. (ret)
EX-Product 'Evangelist'
Irvine, CA
Siemens PLM:
UG/NX Museum:

The secret of life is not finding someone to live with
It's finding someone you can't live without

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

And this is probably why the sale price was so low.
This is an ongoing liability, and those plants will have to make the replacements.

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P.E. Metallurgy, Plymouth Tube

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

It is my understanding that unless agreed to as part of the deal, a firm buying another out of bankruptcy, has no obligation for the bankrupt company's debts. Liabilities are carefully examined during bankruptcy 'buyouts'.

Dik

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Wouldn't be much point for anyone to buy the assets if they have to get stuck with the liabilities, which are enormous. It would likely take decades to break even on such a large liability. As usual, employees wind up paying for management greed and mistakes.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
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RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

The cars involved will permanently be on recall but with no replacement parts available, until they are scrapped at their normal end of life. A lot of the cars involved are old enough that they're probably not worth repairing even if replacement parts were available.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

I haven't found the details yet, but my hunch is that the new owners accepted the replacement part portion of the liability and nothing else. If they hadn't I can't see a bankruptcy court signing off on the deal. If this was really going to strand the effected cars then the court could have forced liquidation and damage payments. These packaged bankruptcies are notorious for the extensive side deals involved.

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P.E. Metallurgy, Plymouth Tube

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

As I understand it the OEMs are legally liable for recalling and repairing the vehicles, but they would normally pass the costs involved to the supplier of the defective parts.

Cheers

Greg Locock


New here? Try reading these, they might help FAQ731-376: Eng-Tips.com Forum Policies http://eng-tips.com/market.cfm?

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Quote (GregLocock)

As I understand it the OEMs are legally liable for recalling and repairing the vehicles, but they would normally pass the costs involved to the supplier of the defective parts.

In my experience with recalls- the OEM is legally responsible, but their contracts with suppliers dictate that suppliers absorb recall costs due to defective parts, and those contracts almost always stipulate that mergers/acquisitions/bankruptcies do not absolve the supplier of responsibility. There are a LOT of relatively small suppliers to the big OEMs, and for a lot of those companies, a big recall would be more financially disadvantageous than a bankruptcy would be. Some OEMs have been burned in the past by small suppliers declaring bankruptcy in response to recalls on their parts, so this is a big part of supplier/OEM contracts.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

So the contract nullifies the bankruptcy that nullifies the contract? Not sure I get how this works.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

I think all that means is that lawyers make a bunch of money negotiating the terms of acquisition of a bankrupt, liable, supplier. The same general principle applies to things like toxic spills, etc. It pays to do due diligence.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
FAQ731-376: Eng-Tips.com Forum Policies forum1529: Translation Assistance for Engineers Entire Forum list http://www.eng-tips.com/forumlist.cfm

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

The OEMs need the replacement parts, so they need to keep these plants running, and now they realize that they will be paying for parts. But none the less this process must continue (buying back cars with defective airbags would cost more).
So this is a settlement that hurts everyone, and by sharing the pain they can live with it.
This is a company that had a market cap of over $2b a couple of years ago, now with a market value of 1/16th of that.

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P.E. Metallurgy, Plymouth Tube

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

In many cases I'm not so sure that buying back cars with defective airbags would cost more.

A lot of the recalled cars are 10 - 15 years old or more (and the concern is primarily on "aged" airbags anyhow), and many of those cars are worth scrap value or not much more. For those, the manufacturer's least-cost course of action could very well be to clandestinely buy these cars cheaply whenever they show up used, then either blow up or remove or destroy the defective airbags so that no one else can sell them, then send the car on its way to the scrap heap.

Problem is that this can't be an official publicly-announced policy, because then suddenly that 15 year old car magically becomes worth its weight in gold to anyone who happens to be sitting on one.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Filing for bankruptcy protection does not mean that a corporation is shut down or been bought by some other corporation. Quite the opposite. It allows operations to continue while supervised negotiations with creditors take place in an orderly fashion.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Quote (Stevenal)

So the contract nullifies the bankruptcy that nullifies the contract? Not sure I get how this works.

It's not complicated.. Honda and Toyota and GM and Chrysler and whomever else enter into a contract with Takata to buy their airbags

Part of that contract stipulates that Takata will absorb all costs related to any recall of Takata parts (and usually pay a bunch of penalties as well, to the OEM)

Another part of that contract stipulates that the contract can't be terminated in a merger or acquisition, and that the contract will be fixed with an Assignment for Benefit of Creditors, which means any damages Takata owes due to that contract is first in line to be paid out of forfeiture of assets should Takata file for bankruptcy.

Quote (EdStainless)

The OEMs need the replacement parts, so they need to keep these plants running, and now they realize that they will be paying for parts. But none the less this process must continue (buying back cars with defective airbags would cost more).

No, they won't, at least not in full. Takata is not ceasing to exist as a company, and the plants are not going anywhere.

KSS is basically buying more manufacturing capacity for cents on the dollar. The recall killed Takata's incoming revenue, but their existing contracts and manufacturing capability are worth a lot more than the cost KSS paid to acquire Takata's assets.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

"...forfeiture of assets should Takata file for bankruptcy..."

Bankruptcy doesn't necessarily mean forfeiture of assets. It means protection from creditors (obviously an overly brief definition), and it therefore means that contracts are thus not necessarily enforceable.

Claiming that a contract can overrule bankruptcy rules just isn't correct; it's just not possible. It's similar to those putting up "legal notice" signs trying to overrule legislation.

Of course, people can try. But it's silly

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

The contracts can, and do, stipulate how Takata structures its debt during a bankruptcy proceeding.

That restructuring of debt by Takata is a process which they control- bankruptcy laws aren't 'overruled'.

The ABC process in bankruptcy proceedings exists for exactly this purpose- it allows a company to structure which debts are to be paid first from any available assets.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Google instantly returns, "The ABC is an insolvency proceeding governed by state law rather than federal bankruptcy law."

So it's a completely different thing.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Getting back to the original question that spawned this 'Definition of Bankruptcy' red herring, Takata is obviously not in a position to pay for the all the Tens of Billions of dollars in liabilities and debts stemming from this fiasco. It will fall to the vehicle OEMs to clean up this mess.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

So how long does an airbag inflator have to last before it's no longer the part manufacturers responsibility? Most parts only have to work through the OEM warranty period, typically 3 to 5 years. Certain emission control devices have to keep working 10 years. Nothing lasts forever. Obviously air bag inflators have some bad failure modes but so do lots of other automotive components. If a wheel bearing fails after 10 years nobody goes after the wheel bearing manufacture even if the vehicle flips into a ditch and kills all the occupants.

----------------------------------------

The Help for this program was created in Windows Help format, which depends on a feature that isn't included in this version of Windows.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

dgallup - the problem for Takata is they knew of a specific defect their inflators were subject to and not only buried the reports but also continued to manufacture them. Not only that, there were other designs that were not subject to that defect, but Takata didn't choose them either.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

Quote (VE1BLL)

Google instantly returns, "The ABC is an insolvency proceeding governed by state law rather than federal bankruptcy law."

So it's a completely different thing.

In a federal bankruptcy proceeding assets can be assigned by general assignment.. it's an assignment process that effectively the same as an ABC.

Which can be controlled by an existing contract.

I've been through this, not just read about it in the paper.

The OEMs are going to incur some costs certainly, but Takata doesn't get to just wash their hands.

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

My point was never this: "...Takata doesn't get to just wash their hands." I never made any such statement, and obviously going through such a process can be 'fatal' to the company involved.

My point was that this claim is somewhat meaningless: "...contracts almost always stipulate that ...bankruptcies do not absolve the supplier of responsibility." If this recall costs tens of billions, then you may rest assured that Takata ain't paying that bill. Ain't. Going. To. Happen. Ever. I'm not sure if that's what you were trying to claim, depending on what you meant by "absolve". Bankruptcy rules can erase debts (absolve), no matter what any contract says. The company may not survive the process, but their debt is even more likely to be killed off.

Also, "...damages Takata owes due to that contract is first in line to be paid out of forfeiture of assets..." Actually, the first to be paid is the Trustee, the second are the government(s) with jurisdiction. There may be others with statutory rights, which may vary with jurisdiction. Finally, the vehicle OEMs with their precious contracts might get some crumbs (if there are any left).

RE: Speaking of "Engineering Failures", Takata has declared bankruptcy...

There have been comments in fillings by some of the auto companies related to how much air bag replacements will cost them since it 'appears that the supplier is no longer a going concern'...

There is also a court case in FL where a Toyota dealer has sued to prevent other dealers from selling used cars that are under recall without making this know prior to the sale, in other words significantly lowering the value of the cars, and creating a liability situation. The dealer that filled this is sitting on a couple hundred cars as he refuses to re-sell them until they are fixed.

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P.E. Metallurgy, Plymouth Tube

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