Key Safety Systems Inc. CEO Jason Luo has the swagger of a riverboat gambler who has just pushed all his chips into the center of the table.
And that's understandable for a Detroit executive who just leapfrogged his competitors.
Luo, a Chinese-born engineer- turned- manager who settled in the United States after college, announced plans to buy most of the assets of the newly bankrupt Japanese airbag supplier Takata Corp. for $1.6 billion.
The deal will more than triple Key Safety's annual sales to $7.5 billion, enabling the suburban Detroit company to become the industry's No. 2 airbag maker, behind Sweden's Autoliv.
"We started thinking about this three or four years ago," Luo revealed in an interview just after last week's acquisition was announced. "I've known Takata for many years. I know the management. I know the people."
Overnight, the deal will catapult Key Safety from an airbag market share of 8 percent to approximately 25 percent, thanks to the assets and customer base of the much-bigger Takata.
Takata's thriving seat belt business — which accounted for 33 percent of the company's revenue last year — will give Key Safety a big share of that product segment.
The Takata deal also creates new business possibilities for the electronics company that acquired Key Safety last year, Ningbo Joyson Electronic Corp.
And despite the maelstrom of fines, lawsuits and multibillion-dollar recall costs that have bankrupted Takata, Key Safety will not be financially exposed to those liabilities.
But Luo's success is not assured. As he works to complete the deal in 2018, he must:
- Prevent further brain drain of key Takata staffers fleeing the company.
- Ensure that Key Safety executives can manage their fast-growing empire.
- Persuade skeptical Japanese automakers to buy his airbags.
- Fend off hungry rivals such as Autoliv, Toyota-affiliated Toyoda Gosei and powerful TRW, now owned by Germany's ZF.
Luo seems unfazed by the challenges, in part because he has been studying the move for years — well before Key Safety was purchased last year by Ningbo Joyson.
Luo has taken several steps to reassure Takata employees, managers and customers that Key Safety will bring stability. Last week, he announced that Takata's factories and r&d center in Japan will remain open. Likewise, there won't be any major layoffs in Japan, and Luo will ask some senior Takata executives to join his company.
Luo also says reports of a brain drain at Takata have been overstated, and that key technical staff have remained at most Takata operations.
On the other hand, the Takata brand name likely will disappear, and company CEO Shigehisa Takada — part of the company's founding family — has told Japanese media that he plans to leave.
But what about Takata's customers, especially Honda Motor Co., its largest client? Is Luo confident that Takata's Japanese customers will stick with the airbag supplier now that it has become a U.S.-managed, Chinese-owned entity?
"We've met with almost every customer," Luo said. "I've asked most of the automakers to support Key Safety. That issue already is in the past."
Luo acknowledges that he has unfinished business. For example, he must figure out how to integrate Takata's many world factories with Key Safety's manufacturing. In January, he hired Steve McKenzie — a 30-year veteran at Alcoa, Siemens and ITT Automotive — as vice president of global manufacturing.
But Luo has not yet decided whether McKenzie will run Takata's factories too.
"We are undecided as yet," Luo said. "We have time to figure out how to organize."
Likewise, the company must boost inflator production. Before the Takata deal was announced, Key Safety had confirmed plans to raise its annual output to 100 million inflators by 2020, up from 70 million last year.
Now Luo says he'll have to raise output again, although he hasn't decided how much.