Key Safety, headquartered in Sterling Heights, Mich., said it would purchase almost most of Takata's global assets and operations in a deal worth almost $1.6 billion.
Takata's inflators can explode with too much force when they fill up an air bag, throwing out shrapnel. Honda has already taken charges of 556 billion yen ($5.0 billion) to cover the costs of recalling an estimated 51 million defective Takata airbag inflators worldwide.
Takata's troubles stem from use of the explosive chemical ammonium nitrate in the inflators to deploy air bags in a crash.
January 2012: In a meeting with US auto-safety regulators, Takata "failed to clarify inaccurate information" on the air bags, according to a consent decree the company later signed.
"The proposed structure for the potential transaction is meant to minimise transaction risk and supply chain disruption concerns for Takata's (automaker) customers", Luo added.
Kevin Dean, a lawyer in SC who has dozens of cases pending against Takata, told ABC News the company's bankruptcy filing was "a cowardly act by a cowardly company and their lawyers to avoid liability". It also throws a wild card into one of the biggest and most complicated recalls in automotive history.
Takata would keep operations of its affected inflators for now to continue supplying recall replacement parts, and would eventually wind down those operations, the two companies said in a statement. So far 100 million inflators have been recalled worldwide including 69 million in the USA, affecting 42 million vehicles.
November 2015: The National Highway Traffic Safety Administration imposes a record civil penalty of up to $200 million against Takata and requires it to recall all inflators with ammonium nitrate unless it can prove they are safe.
"It's likely every automaker involved in this recall will have to subsidize the process because the value of Takata's assets isn't enough to cover the costs of this recall", said Karl Brauer, executive publisher of Kelley Blue Book and Autotrader.
On top of this, the company agreed to pay $125 million to a victims' compensation fund.
Takata has already agreed to pay a billion-dollar fine to settle with USA safety regulators.
Honda said it would continue talks with the supplier but anticipated difficulties in recovering the bulk of its claims.
Takata entered the bankruptcy filing with a plan to sell the company.
June 2009: Honda recalls more than half a million air bags to fix the defect.
2007: Honda reports three incidents of air bags rupturing to Takata. The Japanese parts maker posted its third-straight annual loss even without including the full costs of repairing millions of air bags, which automakers are now paying for.
In January, Takata admitted to hiding the deadly risks of its exploding air bags for about 15 years in an agreement to pay $1 billion to USA regulators, consumers and carmakers.
Takata has already agreed to pay a billion-dollar fine to settle with United States safety regulators over its airbags.