HMC Honda Motor Co Ltd

Takata Corp. has enlisted restructuring lawyers amid an onslaught of recalls covering millions of vehicles with rupture-prone air bags the Japanese company supplied, said people familiar with the matter.

The Japanese automotive supplier is working with restructuring lawyers at law firm Weil Gotshal & Manges LLP, the people said, tapping them for advice on looming uncertainties over costly recalls of air bags linked to 10 deaths and dozens of injuries globally. Weil's restructuring practice has been working with Takata for months dating to at least the fall, they said.

The strategies Weil restructuring lawyers are advising Takata to pursue and the scope of the firm's engagement remain unclear. But the firm's restructuring practice has recently devoted increased time to Takata, one of the people said.

Restructuring lawyers typically help troubled companies raise money, rework debt or steer their way through bankruptcy proceedings. No bankruptcy filing or other significant restructuring is imminent for Takata, the people said.

Still, Takata's use of Weil's restructuring lawyers is significant, as the law firm's practice is usually enlisted to help execute deals stemming from the most pronounced corporate troubles. Weil lawyers, for instance, represented General Motors Co. in the Detroit auto maker's $50 billion government rescue and bankruptcy restructuring.

The firm last year represented auto-parts supplier Chassix Holdings Inc. in bankruptcy court. Weil has represented companies in five of the six largest bankruptcies in U.S. history, including the collapse of Lehman Brothers Holdings Inc., which helped trigger the financial crisis.

Takata isn't at immediate risk of running out of money. The company has recently posted profits, and currently expects additional financial gains even amid mounting recalls.

Fourteen auto makers are recalling some 24 million vehicles in the U.S. with Takata air bags that risk exploding and spraying shrapnel, one of the largest such automotive actions ever. More than 60 million vehicles have been recalled globally on account of the safety problem, Japan's transport ministry has said. U.S. regulators and lawmakers have suggested tens of millions of additional air bags could eventually be recalled.

Takata, which had roughly $535 million in cash at the end of December, is currently trying to sell its automotive interiors division to raise money amid the recalls. Takata is working with Japanese bank SMBC Nikko Securities Inc. and U.S. bank Moelis & Co. on the potential sale, which The Wall Street Journal previously reported.

Shares of the Japanese supplier, which has a market capitalization of about $415 million, have traded at historic lows this year as recalls mount. Takata's current financial condition doesn't reflect recall costs it may have to bear later. Analysts have estimated the cost could reach billions of dollars, eating into a large portion of Takata's annual sales. Takata has said it can't yet predict the final costs of the recalls.

The company could also face a hefty fine depending on the outcome of a U.S. Justice Department criminal probe. A separate $70 million U.S. regulatory fine could jump to $200 million should regulators flag Takata for additional infractions. The company agreed to the fine for failing to alert regulators to defective air bags in a timely manner as legally required.

Takata must eventually recall all air bags using the chemical ammonium nitrate as a propellant unless the company proves the devices are safe. Officials have cited the chemical as being prone to destabilizing and exploding after prolonged exposure to moisture. Takata has said it is cooperating with government officials.

In addition, Honda Motor Co., Takata's largest customer, in November said it would no longer use the supplier's front driver or passenger air-bag inflaters in new vehicles currently under development. Other auto makers followed Honda with similar moves.

Auto makers recalled another five million vehicles in the U.S. earlier this year after a man died in South Carolina when an air bag ruptured in his Ford Motor Co. pickup truck. Ford has said it is cooperating with regulators and expressed condolences over the death.

Write to Mike Spector at mike.spector@wsj.com and Matt Jarzemsky at matthew.jarzemsky@wsj.com

(END) Dow Jones Newswires

March 08, 2016 15:05 ET (20:05 GMT)

Honda Motor (NYSE:HMC)
Historical Stock Chart
From Mar 2024 to Apr 2024

Honda Motor (NYSE:HMC)
Historical Stock Chart
From Apr 2023 to Apr 2024