TOKYO?Daicel Corp. is no longer a strong contender to take over Japanese air-bag maker Takata Corp., and car makers are instead looking with favor toward Autoliv Inc. of Sweden, people familiar with the matter said.

Takata's customers want the buyer of the beleaguered parts supplier to take over operations with a minimum of disruption, and they are less focused on the financial terms of the deal, the people said.

Takata air bags are linked to the deaths of more than a dozen people and more than 100 injuries globally. The air bags use ammonium nitrate, an explosive compound, to inflate. Prolonged exposure to humidity can cause them to degrade over time, leading to explosions that spray shrapnel in vehicle cabins.

Car makers are recalling nearly 70 million air bags in the U.S. alone, and the global cost of recalls could eventually exceed $12 billion, according to an estimate by Jefferies Group LLC.

The projected costs have driven down Takata's share price and forced it to seek a buyer. A steering committee named by Takata is narrowing down the list of bidders after they presented their plans to car makers at a meeting in New York in late October.

Auto makers attending the presentation "loved Autoliv's proposal" because of the company's experience as a supplier and ability to take over with little disruption, one person briefed on the meeting said. However, people familiar with the process said no decision has been reached and the steering committee is still reviewing bids.

One potential hurdle for Autoliv is antitrust scrutiny. The company accounts for about 40% of air-bag sales globally, while Takata controls 20% of the market, according to Nomura Securities Co.

Auto makers play a big role in the decision because of their position as creditors and main customers of Takata.

Before the New York meeting, a joint bid by century-old Japanese chemicals maker Daicel and private-equity firm Bain Capital had been at the top of the list of contenders because the bid offered the most cash?up to about $3.4 billion, people familiar with the matter said.

But Daicel and Bain said they would pay only part of the price initially and deliver the rest after a revitalized Takata started generating profits, one person familiar with the bids said.

Also, people familiar with the process said auto makers wantTakata's new owners to have experience running assembly lines making air bags and seat belts to ensure manufacturing flaws don't recur. Daicel currently makes the inflaters that go into air bags, not the complete unit.

Representatives of Autoliv, Daicel, Bain Capital and the Takata steering committee declined to comment.

The Daicel-Bain bid ran into further opposition because the duo proposed that Takata file for bankruptcy in both the U.S. and Japan, the people said. Other bidders for Takata?Autoliv, Flex-N-Gate Corp. and Key Safety Systems Inc.?are weighing a bankruptcy filing of Takata's unit in the U.S. but not Japan, they said.

A Japan bankruptcy filing could make it harder for smaller Japanese companies that supply Takata to maintain access to credit.

Like Autoliv, Key Safety Systems and Flex-N-Gate are experienced manufacturers of major auto parts. That keeps them in the running, one person familiar with the talks said.

Write to Atsuko Fukase at atsuko.fukase@wsj.com and Sean McLain at sean.mclain@wsj.com

(END) Dow Jones Newswires

November 16, 2016 09:55 ET (14:55 GMT)

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