Faults in Takata's airbags prompted one of the industry's biggest ever safety recalls, and have been linked to at least 17 deaths around the world, with the company pledg replace tens of millions of defective air-bag inflators used by 19 vehicle and truck makers around the world, from Tesla, to Toyota Motor Corp.
Defective airbags made by Takata have been tied to 11 deaths and more than 180 injuries in the United States alone.
The scandal has involved nearly every major global automaker, including top client Honda, which has already written down significant costs linked to the crisis.
Rival Key Safety Systems, based in suburban Detroit and owned by Ningbo Joyson Electronic Corp. of China, will buy most of Takata's assets for $1.6 billion and take over its manufacturing operations to make seat belts, air bags and other automotive safety devices, according to an announcement by Takata and Key.
"KSS will acquire most of Takata, with the exception of certain assets and operations related to security cushions" involved in the scandal, said the USA firm.
"We caused troubles for our supporters, those who cooperated with us and the creditors", Takata Chairman Shigehisa Takada said at a press conference on Monday.
Takata's total liabilities stand at 1.7 trillion yen (US$15 billion), Tokyo Shoko Research estimated. Immediate confirmation was not available.
The tower that's been teetering on the bring of collapse for the past few years has finally toppled over as Takata has officially filed for bankruptcy. It said the court had accepted the measure.
Further afield, Takata's banks in Japan may also be stuck with loans that have not been repaid, though how much remains is subject to negotiations and the decisions of Japanese courts.More news: ECB pulls the plug on 2 troubled Italian banks
"Honestly, I still think things are going to be tough for Takata", said Takeshi Miyao, an analyst at Tokyo-based market researcher Carnorama.
The money from the sale of the business to Key Safety Systems will be used to cover those and other costs resulting from the airbag recall.
Jason Luo, president and chief executive of KSS, voiced confidence in Takata's rehabilitation.
There were no immediate plans to reduce Takata's 46,000-employee headcount or close factories as part of the deal, he added. The arrangement is meant to allow Takata to continue running without interruptions and with minimal interruptions to its supply chain. It is expected those will be run by the reorganised Takata and "eventually will be wound down". Analysts attributed the upsurge on June 23 to speculative trading among short-term investors hoping to profit from wild swings in the share price.
Honda Motor Co, Takata's biggest customer, said it had reached no final agreement with Takata on responsibilities for the recall.
In September previous year, BMW recalled 110,000 cars in Japan, while Honda, Japan's second-biggest carmaker, recalled 668,000 vehicles for the same issue, bringing the tally of cars it has had to bring back to its dealership to 51 million.
The problem is that the unstable chemical can degrade, especially in humid conditions.
In a statement, Takata said it was working with 14 vehicle manufacturers on "substantial accommodations" and "liquidity enhancements" to finance a restructuring, while entering into a deal to sell certain viable assets to Key Safety Systems for about $1.6 billion.