The company's American arm filed its papers on Sunday night, US time, in the state of Delaware, with the Japanese parent following suit on Monday, local time.
As part of the bankruptcy, US-based Key Safety Systems, which owned by Ningbo Joyson Electronic of China, will purchase most of Takata's assets for around 175 billion yen ($2.1 billion).
Excluded from the deal are Takata plants and facilities involved in the production of phase-stabilised ammonium nitrate airbag inflators. As originally designed and installed, the inflator compound deteriorates when it is subjected to high temperatures and humidity.
Damaged units burn too fast when ignited and blowing apart its metal container, causing death and injury.
The structure of Takata's bankruptcy and sale ensures Key Safety Systems is protected from liabilities related to Takata's faulty inflator, and the legal ramifications related to the Japanese company's cover up.
According to Key Safety Systems, the deal will also "minimise transaction risk and supply chain disruption concerns" for Takata's customers. Assuming bankruptcy proceedings are finalised in good order, the majority of Takata's assets will be transferred over to Key during the first quarter of 2018.
Key says it will grow from 11,000 to 60,000 employees across 23 countries after the deal is completed. It will keep all of Takata's existing assets in Japan, and move the company's regional headquarters to Japan.
What remains of Takata will eventually be wound down once the ongoing recall process of around 100 million cars is completed, and legal and financial matters are resolved.
In a press conference, Shigehisa Takada, Takata's CEO, said: "If things are left as is, we are aware of risks that we may not able to raise fund and to continue stable supply of products.
"In light of the management environment we face, the state of negotiations with the sponsor candidate and carmakers, and the external expert committee's opinion, we have decided today to file for bankruptcy protection."
The $2.1 billion purchase price for most of its assets will go some way to helping Takata meet its obligations.
Nobuaki Kobayashi, Takata's attorney, has stated the company's liabilities are still being calculated, and discussions with automakers are ongoing.
Analysts speaking to Automotive News estimate Takata's existing liabilities to be between US$10 and US$15 billion ($13.2 to $19.8 billion).
In March, the company pled guilty to the US federal court, and agreed to pay out US$1 billion ($1.3 billion) in fines and compensation.
So far Takata has already paid its US$25 million ($33 million) fine to the US government, and injected the required US$125 million ($167 million) into the victims’ compensation fund. The US$850 million ($1.1 billion) owed to automakers is due in 2018, or within five days of being bought out.
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