China's Ningbo Joyson Takes Over Japan's Takata

Company Performance

China's Ningbo Joyson Takes Over Japan's Takata

Defective airbags leads world's largest airbag maker Takata to bankruptcy

1. Ningbo Joyson wins big with Takata deal, avoiding recall costs

2. Wang has built auto parts empire on decade-long takeover run

Wang Jianfeng has been on an epic acquisition tear over the past decade, assembling a formidable auto parts empire in China with US$ 4 billion in revenue. Now, the 46-year-old Wang, founder and chairman of Ningbo Joyson Electronic Corp, is about to pull off his biggest deal yet: a US$ 1.59 billion takeover of Takata Corp., the troubled airbag maker that filed for bankruptcy protection and is in the midst of the largest auto recall in history.

Ningbo Joyson is acquiring Takata's assets through its wholly owned US airbag maker Key Safety Systems Inc, which it acquired last year for US$ 920 million. The deal is structured to shield Key Safety from shouldering the cost of Takata's projected 100-million unit recall of faulty airbag inflators linked to at least 17 deaths. The inflator business will stay with Takata as will the financial responsibility for the recall, which will cost an estimated 1 trillion yen (US$ 9 billion), according to Takaki Nakanishi, an analyst at Jefferies Group LLC. The Takata acquisition could make Wang the owner of the world's second-biggest safety parts supplier, trailing only Sweden's Autoliv Inc. "Takata is a good company with strong factories and technologies, but it has made mistakes," Wang told Bloomberg in April in Shanghai. "There's potential for us to become one of the top two players in auto safety."

The Chinese executive founded Ningbo Joyson in 2004 to supply parts including control, air-intake and windscreen-washer systems, and counts Volkswagen AG, Ford Motor Co. and General Motors Co. among its customers.

Rust Belt

Wang bought the shell of a loss-making state-owned textile company in China's rust-belt northeast in 2011 and went public, injecting its auto parts business into the listed company. Wang's family owns the NB Joyson Invest Holding Co., the largest shareholder of Shanghai-traded Ningbo Joyson.

This decade Wang has spent 11 billion yuan (US$ 1.6 billion), acquiring companies such as Preh GmbH, IMA Automation Amberg GmbH and Quin GmbH in Germany, and Evana Automation in the US. Along with announcing the acquisition of Key Safety in February 2016, Joyson also took over the automotive division of Germany's TechniSat Digital GmbH to develop car connectivity, infotainment and navigation systems.

Decisive Entrepreneur

Wang, who goes by Jeff among English-speaking employees, wins praise for his decisiveness and keeping existing management teams in place after acquisitions. "Jeff is easy to talk to and quick to make decisions, a typical entrepreneur," said Hummel in an interview.

By 2021, he aims to raise revenue to US$ 10 billion from an estimated US$ 4-5 billion this year, and boost net profit margin to 6% from 4.9% in 2015. The company also plans to expand in Southeast Asia and South America markets and enter the Japanese market, said Tang in April.

Risks Exist

"Risks exist, obviously, but opportunities should outweigh risks because Takata has good technologies in passive safety equipment," said Zhou Chunlin, an analyst at Wanlian Securities Co. in Shanghai. "It's been doing well in all segments it has ventured into by doing M&As, but the biggest opportunities should come from the safety device segment, because the requirement for safety is even higher due to the arrival of intelligent driving."

Key Safety Systems Inc will substantially retain all of Takata's employees worldwide, move its Asia headquarters from Shanghai to Tokyo and doesn't plan to shut down any of Takata's manufacturing facilities in Japan, it said. "I always believed that if China's industrial manufacturing wants to go out, China needs to incorporate global wisdom to develop its indigenous technologies," said Wang. "The most advanced technologies are still in countries such as Germany, Japan and US."

Takata Bankruptcy Filings Clear the Way for Overhaul: Timeline

Takata Corp. filed for bankruptcy protection, paving the way for a restructuring of the troubled Japanese airbag maker as it looks to tide over the biggest safety recall in automotive industry. It agreed to sell its businesses and assets to Chinese-owned Key Safety Systems Inc. for 175 billion yen (US$ 1.6 billion). Founded in the early 1930s as a textile maker, Takata turned into a supplier of auto safety devices. Below is a timeline of events leading up to bankruptcy filing:

2003: The company first learned of a ruptured inflator when one was found in a vehicle in Switzerland.

November 2008: Honda recalls about 4,600 Accords and Civics to fix faulty airbags. Takata's airbags use ammonium nitrate as propellant that can be rendered unstable after long-term exposure to heat and humidity, leading their inflators to rupture and spray metal shards at vehicle occupants.

May 2009: Oklahoma teenager Ashley Parham's death is linked to the airbag in her 2001 Honda Accord sedan. Honda and Takata deny fault and settle for an undisclosed sum. In July, Honda recalls 285,000 Accord and Civic model cars in the US

May 2011: Honda expands a recall to include an additional 833,000 vehicles after calling back 437,763 units in February 2010.

April 2013: Honda, Toyota and Nissan together call back 3 million vehicles. Toyota says malfunctioning inflators could cause the airbag to deploy abnormally during a crash.

September 2014: The New York Times reports that airbag flaws that were known for long to Takata and Honda led to the recalls.

October 2014: The US National Highway Traffic Safety Administration, or NHTSA, adds about 3 million vehicles to its tally of cars recalled for Takata airbags, taking the total to 7.8 mln.

November 2014: Three US senators call for the Justice Department to open a criminal investigation after the New York Times reports Takata executives ordered the disposal of airbag inflators and deletion of data after testing the components in 2004. Days later Takata shares fall to lowest in more than five years after the calls for a probe. Honda discloses the death in Malaysia in July of a woman in a 2003 Honda City subcompact, the first tied to Takata airbags outside the US.

December 2014: NHTSA says Takata rejected the regulator's demand to expand its regional airbag recalls to the entire country. The supplier says its chairman Shigehisa Takada will replace Swiss national Stefan Stocker as president to strengthen management.

February 2015: NHTSA says it will fine Takata $14,000 for each day it fails to cooperate with an investigation into the part defect.

May 2015: NHTSA announces a national recall. Takata agrees to double the number of cars that will be repaired to 34 million.

June 2015: A US Senate report says Takata employees knew of serious safety and quality control issues as early as 2001. Takada makes his first public apology after the annual shareholder meeting in response to the auto-safety crisis.

November 2015: Takata agrees to pay a US civil penalty of up to US$ 200 million and have an independent monitor oversee recalls. Two days later Honda says it will discontinue using Takata inflators in any new models under development and accuses the supplier of manipulating test data. Toyota also says it won't use the device with ammonium nitrate.

December 2015: Japan bans Takata inflators with ammonium nitrate propellant in cars under development, sets time frames for the parts to be phased out from existing models.

May 2016: NHTSA orders Takata to replace as many as 40 million additional airbags. Takata hires Lazard Ltd. to pursue investment in the supplier. Japan orders call back of an additional seven million vehicles, bringing the number of vehicles recalled in the country to about 19.6 million.

September 2016: Documents released by the NHTSA reveal that of 245,000 recalled Takata airbag inflators pulled from cars and tested, 660 ruptured. Takata sells its Irvin Automotive Inc. unit, which makes interior trim and seating material, to Piston Group.

January 2017: Takata agrees to plead guilty and pay US $1 billion in the US to settle an investigation. Separately, US prosecutors charge three former Takata executives for their alleged role in hiding the risks since 2000.

February 2017: Takata says an external committee appointed to spearhead its restructuring recommends Key Safety Systems as the leading bidder.

A few weeks later a US judge accepts Takata's guilty plea, made as part of a US $1 billion settlement deal with the Justice Department. June 26, 2017: The Tokyo-based supplier says a court in Japan accepted its bankruptcy protection filing, adding Key Systems won't acquire its ammonium nitrate airbag assets. It also files for Chapter 11 bankruptcy in Delaware, listing more than US $10 billion in liabilities, according to court filings.