* Expects net loss Y64.0 bln in year through March
* Sets aside Y97 bln for $1 bln U.S. fine
* Seeks financial rescue as air bag recall fallout continues (Adds company comment, details on Takata air bag issues)
By Naomi Tajitsu
TOKYO, Feb 10 (Reuters) - Takata Corp on Friday said it expects to post a full-year net loss for the third consecutive year as the Japanese air bag maker anticipates costs related to the biggest automotive product recall in history will eat away at its bottom line.
Takata forecast a loss of 64.0 billion yen ($563 million) for the year through March rather than its previous estimate of 20.0 billion yen in profit. It booked a loss of 21.1 billion yen last year.
Takata, facing billions of dollars in recall-related costs, has been looking for a sponsor to lead its restructuring. People familiar with the matter have told Reuters that Takata has selected Key Safety Systems.
The costs behind the downgrade include a provision for 96.93 billion yen as part of a $1 billion settlement with the United States Justice Department, plus a 3.5 billion yen special loss for recall-related costs in the business year's final quarter.
"In January we came to an agreement with the U.S. Department of Justice which includes a fine, and this has led to an extraordinary loss. As a result, we have lowered our full-year forecast," Takata said in a statement.
The auto parts maker is set to plead guilty on Feb. 27 in federal court in Detroit to a single felony count of wire fraud to resolve a Justice Department investigation into ruptures of its air bag inflators that have been linked to at least 16 deaths worldwide, mainly in the United States.
The company has agreed to withdraw about 100 million inflators globally and has been struggling to supply replacements.
Mounting costs have pummelled Takata's profits, while its share price has dropped 85 percent since 2014.
If Takata is found solely responsible for the defective inflators, it could face a bill of more than $10 billion for recalls announced so far, based on calculations from industry experts and automakers including General Motors Co.
The potential liability would dwarf Takata's cash reserves of around 72.4 billion yen as at the end of September. So far, automakers have paid most of the recall costs while they discuss with Takata how to divide responsibility.
Takata also on Friday reported operating profit for the October-December quarter of 10.8 billion yen, slightly lower than the 12.6 billion yen of the same period a year prior. ($1 = 113.7300 yen) (Reporting by Naomi Tajitsu; Editing by Christopher Cushing)