US court gives Takata time to resolve bankruptcy, halts faulty airbag trial

Takata wanted a 6-month halt on hundreds of cases so that a $1.6 bn sale of its ops can be completed

Automakers on Wednesday won a temporary reprieve from lawsuits filed by victims of defective air bags made by bankrupt Takata Corp  that led to the largest-ever auto safety recall and at least 18 deaths.

The decision gives the Japanese auto supplier breathing room to work through its bankruptcy reorganization.

US Bankruptcy Judge Brendan Shannon in Wilmington, Delaware, granted a 90-day halt on lawsuits brought by Hawaii, New Mexico, the US Virgin Islands as well as individuals. He did not extend the shield to 48 federal cases that extend across several districts, saying the lawsuits had already advanced.

Takata argued for a six-month freeze on hundreds of lawsuits so management could complete a $1.6 billion sale of its viable operations, crucial to its reorganization, and replace air bag inflators that are subject to the biggest recall in automotive history.

Shannon said he was "extremely sensitive" to the plaintiffs' cases but believed a "breathing spell" for Takata was appropriate. The stay expires on Nov. 15.

At least 18 deaths and 180 injuries worldwide have been tied to a defect that causes Takata inflators to explode with excessive force, unleashing metal shrapnel inside vehicles.

Major automakers including BMW AG , Ford Motor Co , Honda Motor Co Ltd <7267.T> and Toyota Motor Corp, argued in favour of the pause.

Takata and TK Holdings Inc, its U.S. unit, said they faced tens of billions of dollars in liabilities when they filed for bankruptcy protection in June, including claims from automakers that used its airbags and individuals who filed class-action lawsuits.

Bankruptcy automatically stayed hundreds of lawsuits against TK Holdings for wrongful death, injuries, economic loss and breach of consumer protection laws stemming from the faulty airbags.

In July, the company asked the court to suspend lawsuits against automakers brought by airbag victims, and last week Takata separately filed for U.S. bankruptcy protection, or Chapter 15, in an effort to pause U.S. lawsuits against the parent.

The official bankruptcy committee that represents injured drivers said in court papers the injunction would have "human consequences" and prevent people from pursuing compensation.

The committee cited a 23-year-old New Jersey woman who became quadriplegic from brain injuries that a government investigator said were caused by a faulty Takata air bag.

The woman's lawyers estimated her economic loss would be $18 million, not including potential damages for pain and suffering.

The defective air bags have been linked to at least 18 deaths and 180 injuries worldwide.

The recall, the largest in automotive history, will eventually cover 125 million inflators, many of which still need to be replaced.

In January, Takata entered a settlement with the US Department of Justice, setting aside $125 million to compensate consumers and $850 million in restitution for automakers.