Car Makers Signal Preference for Autoliv's Proposal for Takata
November 16 2016 - 10:10AM
Dow Jones News
TOKYO—Daicel Corp. is no longer a strong contender to take over
Japanese air-bag maker Takata Corp., and car makers are instead
looking with favor toward Autoliv Inc. of Sweden, people familiar
with the matter said.
Takata's customers want the buyer of the beleaguered parts
supplier to take over operations with a minimum of disruption, and
they are less focused on the financial terms of the deal, the
people said.
Takata air bags are linked to the deaths of more than a dozen
people and more than 100 injuries globally. The air bags use
ammonium nitrate, an explosive compound, to inflate. Prolonged
exposure to humidity can cause them to degrade over time, leading
to explosions that spray shrapnel in vehicle cabins.
Car makers are recalling nearly 70 million air bags in the U.S.
alone, and the global cost of recalls could eventually exceed $12
billion, according to an estimate by Jefferies Group LLC.
The projected costs have driven down Takata's share price and
forced it to seek a buyer. A steering committee named by Takata is
narrowing down the list of bidders after they presented their plans
to car makers at a meeting in New York in late October.
Auto makers attending the presentation "loved Autoliv's
proposal" because of the company's experience as a supplier and
ability to take over with little disruption, one person briefed on
the meeting said. However, people familiar with the process said no
decision has been reached and the steering committee is still
reviewing bids.
One potential hurdle for Autoliv is antitrust scrutiny. The
company accounts for about 40% of air-bag sales globally, while
Takata controls 20% of the market, according to Nomura Securities
Co.
Auto makers play a big role in the decision because of their
position as creditors and main customers of Takata.
Before the New York meeting, a joint bid by century-old Japanese
chemicals maker Daicel and private-equity firm Bain Capital had
been at the top of the list of contenders because the bid offered
the most cash—up to about $3.4 billion, people familiar with the
matter said.
But Daicel and Bain said they would pay only part of the price
initially and deliver the rest after a revitalized Takata started
generating profits, one person familiar with the bids said.
Also, people familiar with the process said auto makers want
Takata's new owners to have experience running assembly lines
making air bags and seat belts to ensure manufacturing flaws don't
recur. Daicel currently makes the inflaters that go into air bags,
not the complete unit.
Representatives of Autoliv, Daicel, Bain Capital and the Takata
steering committee declined to comment.
The Daicel-Bain bid ran into further opposition because the duo
proposed that Takata file for bankruptcy in both the U.S. and
Japan, the people said. Other bidders for Takata—Autoliv,
Flex-N-Gate Corp. and Key Safety Systems Inc.—are weighing a
bankruptcy filing of Takata's unit in the U.S. but not Japan, they
said.
A Japan bankruptcy filing could make it harder for smaller
Japanese companies that supply Takata to maintain access to
credit.
Like Autoliv, Key Safety Systems and Flex-N-Gate are experienced
manufacturers of major auto parts. That keeps them in the running,
one person familiar with the talks said.
Write to Atsuko Fukase at atsuko.fukase@wsj.com and Sean McLain
at sean.mclain@wsj.com
(END) Dow Jones Newswires
November 16, 2016 09:55 ET (14:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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