Japanese auto parts suppliers Denso and Yazaki have agreed to plead guilty… (Andrew Harrer, Bloomberg )
For more than a decade, executives at several major Japanese auto parts makers met in secret, sometimes speaking in code, to fix prices on wiring harnesses and other crucial components.
The global conspiracy, which stretched from distribution centers in the U.S. heartland to corporate high-rises in Tokyo and Europe, remained undetected for years, according to U.S. government documents, allowing a small cadre of suppliers to effectively control the lucrative $30-billion market in automotive wiring.
But on Monday, the U.S. Justice Department announced it had uncovered a major piece of the scheme. After two years of investigation, supplier Yazaki Corp. agreed to plead guilty to U.S. charges and pay a $470-million fine, the second-largest ever under the Sherman antitrust act. In addition, four of the Tokyo company's executives — each of whom spent time in the company's U.S. offices — are to serve prison terms of up to two years for their roles in the long-running plot to fix prices and rig bids.
Another supplier, Denso Corp. of Kariya, Japan, agreed to plead guilty to U.S. charges and pay a $78-million fine.
Acting Assistant Atty. Gen. Sharis Pozen called the ongoing probe, which involves as many as a dozen companies on three continents, "the largest criminal investigation the Antitrust Division has ever pursued."
The complex scheme fixed prices and controlled allocation of parts to automakers such as Toyota Motor Corp., Honda Motor Co. and Subaru from 2000 to 2010, according to Justice Department documents filed in federal court in Michigan.
In secret meetings, the companies mapped out strategies for controlling the supply of automotive wiring, fuel sensors, gauges and on-board computers on a model-by-model basis to specific manufacturers, the Justice Department said. This allowed them to sell electrical components to car companies at inflated prices. They also met to monitor and enforce their agreements, it said.
The penalties handed down Monday follow a separate $200-million fine levied by the Justice Department in November on Furukawa Electric Co. of Tokyo in an action that also will send three other Japanese executives to jail. In a related action in Japan this month, regulators levied large fines on four suppliers.
"I think a lot of folks in the U.S. industry have suspected without proof that the Japanese suppliers were collaborating," said Logan Robinson, the former general counsel of auto parts giant Delphi Automotive, who now teaches law at the University of Detroit Mercy.
In February 2010, FBI agents raided Michigan offices of Yazaki, Denso and a third Japanese supplier, Takai Rika, while agents in Japan conducted a similar action against Yazaki's main offices there. Last summer, European Commission officials visited the offices of suppliers including Lear Corp. and TRW Automotive Holdings Corp., both based in Michigan. And in the fall, the Justice Department requested documents from a number of suppliers, including Canadian supplier Magna International Inc.
A number of the European and North American companies have or had business relationships with the Japanese suppliers that have been part of the probe. For example, Lear and Furukawa had a joint venture from 2004 to 2010 to make assemblies known as wire harnesses; that ended when Furukawa bought out Lear's stake.
The Japanese automakers have been reluctant to talk about the probe and would not discuss whether they suffered damages from the conspiracy.
In the Japanese auto industry, many automakers own substantial stakes in the suppliers.
"This has created cozy relationships," Robinson said.
Toyota, for example, owns nearly 25% of Denso.
"We do not have control over the day-to-day operations of Denso," said Toyota spokesman Javier Moreno, adding that the automaker has cooperated with investigators and expects suppliers to follow the law.
Honda spokesman Ed Miller said the automaker cooperated with the federal probe, but "we are not a subject of the investigation."
American suppliers, as well as auto dealers and consumers who believe they have paid higher prices because of the price fixing, have begun taking legal action separate from the Justice Department probe.
Since October, about 45 suits seeking class action status have been filed in federal court against companies including Yazaki and Denso, as well as Delphi, based in Troy, Michigan, and German parts maker Leoni. The suits allege that these companies collectively control more than 85% of the global market for the products they make, giving them the power to control pricing if they so choose.
"Some of these products could cost only a penny," said Gregory Hansel, an attorney in Maine who has filed suits on behalf of six auto parts makers who allege that price fixing hurt their ability to compete. "But if you raise that by a quarter-penny and multiply it by millions of products over a decade, we're talking about real money."