Supplier price-fixing litigation may play out in Detroit
Dealers file 3 of 10 total lawsuits so far
DETROIT -- Detroit is likely to remain center stage in a legal drama now playing out around the country over price-fixing collusion among automotive wire harness suppliers, long after two former executives of Furukawa Electric Co. pleaded guilty today in federal court.
Hirotsugu Nagata, 46, former CFO of Furukawa's U.S. subsidiary, American Furukawa Inc., from 2004 to 2009; and Junichi Funo, 41, assistant general manager of Honda sales at American Furukawa until 2009, appeared today before U.S. District Judge George Steeh in Detroit and pleaded guilty to one count each of conspiracy to restrain trade in violation of the Sherman Antitrust Act.
Nagata is expected to serve 15 months and Funo one year and one day in U.S. prisons in the U.S. Department of Justice case.
The company itself and another former executive, Tetsuya Ukai of the parent company's Honda sales division, have separate court dates in mid-November to enter their own pleas. Furukawa agreed in late September to plead guilty and pay a $200 million fine in the case.
The $29 billion U.S. automotive wire harness industry has come under assault in five states, where 10 new lawsuits filed since Oct. 5 allege the suppliers engaged in false and deceptive trade practices, fraudulent concealment, violation of federal antitrust law and unjust enrichment.
The 10 civil suits all name, in addition to Furukawa:
Yazaki Corp. of Iwata, Japan and/or U.S. subsidiary Yazaki North America Inc. of suburban Detroit, the industry market leader.
Sumitomo Electric Industries Ltd., No. 2 in size and the fastest growing, which has an administrative headquarters in Kentucky and offices in suburban Detroit.
Delphi Automotive LLP, the one-time General Motors parts unit based in suburban Detroit.
Lear Corp., the seating and electronics supplier based in suburban Detroit.
Leoni AG, a wiring and cable products supplier based in Nuremberg, Germany.
S-Y Systems Technologies GbmH, Regensberg, Germany, which Yazaki acquired in 2005. S-Y has an office in suburban Detroit.
Some of the new lawsuits also go on to target Denso Corp., Tokai Rika Co. Ltd. and Fujikura America Inc., which are based in Japan but have U.S. offices as well.
Denso and Tokai's U.S.-based subsidiary Tokai Rika Group North America was raided by FBI agents last year along with Yazaki North America as part of the global price-fixing probe.
"The price of cars is already high anyway, and we're fighting every day for business share without the added burden of what the (suppliers) have done to competition," said Steve Landers, president of Little Rock, Ark.-based Landers Auto Group No. 1 Inc. and owner of Landers Toyota and Steve Landers Chrysler Dodge Jeep Ram, who brought one of three dealership lawsuits.
"In a way, it's really a double-punch to the dealer, though it also gets passed along to the consumer. Hopefully, doing this (the lawsuit) can get them to adjust the prices on future harnesses, to offset the overcharging."
The lawsuits -- three on behalf of dealerships and seven on behalf of consumers who bought Honda, Toyota and other cars during 2000-2010 -- all followed days after the Furukawa plea agreement became public and seek to certify a class action on behalf of harness buyers in Michigan, California, Minnesota, Arkansas and Mississippi.
Detroit area attorneys expect the suits will coalesce soon into one by order of the U.S. Judicial Panel on Multi-district Litigation -- possibly before Steeh, or another judge in Detroit.
"It does seem like Detroit would be the center of gravity for those cases, because Michigan is home to a lot of the firms and (witnesses)," said Patrick Cafferty, founding partner of Cafferty Faucher LLP in Ann Arbor, Mich., which is handling two of the five buyer lawsuits in Michigan.
"But then the MDL (multidistrict litigation panel) is not always predictable with those decisions."
The global automotive wiring harness market grew 32.2 percent to $29 billion last year from $21.9 billion in 2009, and could grow to $32 billion by 2012, according to the Global and China Automotive Wiring Harness Industry Report, 2010-2011, released by Dublin, Ireland-based tech analyst firm Research and Markets earlier this year.
Yazaki accounts for nearly 30 percent of the global wire harness market. Sumitomo was fastest-growing with 24 percent, while Delphi was third with about 16.7 percent global market share.
Local suppliers contacted by Crain's Detroit Business, an affiliate of Automotive News, downplayed the lawsuits.
Lindsey Williams, director of corporate relations at Delphi, said the allegations against the company are without merit and Delphi will seek to be dismissed from the suits.
Lear said in a statement that it also believes the claims to be without merit, and Misty Matthews, manager of communications for Yazaki North America, said its legal team is reviewing them.
Robert Calo, shareholder and co-chair of the white-collar criminal defense practice at Portland, Ore.-based Lane Powell PC and attorney for Furukawa in the criminal case in Detroit, did not return two phone calls seeking comment last week. David Noble, senior manager of administration at American Furukawa, also did not return two phone messages.
Attorneys Thomas Gallagher and Matthew Lund of Pennsylvania-based Pepper Hamilton LLP represent Ukai in the Furukawa criminal case. It was unclear who represents the other executives.
David Ettinger, partner and chairman of the antitrust and trade regulation practice group at Detroit-based Honigman Miller Schwartz and Cohn LLP, said it's possible that two classifications of lawsuits against the suppliers could emerge: one for "direct purchasers" or OEMs that allege they overpaid for components, and another for "indirect purchasers" like dealers and consumers who may have paid a markup.
John Barrett, president of the Barrett Law Group PA in Lexington, Miss., who brought another proposed class action on behalf of Hammett Motor Co. Inc. in Durant, Miss., said dealerships would likely have two sets of legal claims against the suppliers, since they purchase both vehicle inventory from OEMs and replacement wire harnesses for warranty and other repair work in their service divisions.
"I think that most of the dealers in the United States are going to be somehow affected. It depends on the volume of aftermarket wire harnesses sold, but a dealer might at some point have done wire harness work on any car that came into its service department," he said. "And if you did one (wiring) replacement in the last 10 years, it's enough to give you standing (to sue)."
But John Youngblood, chairman of the automotive dealer practice at Abbott, Nicholson, Quilter, Esshaki & Youngblood PC in Detroit, said he is not sure dealers have the best claims since their markups are passed along to consumers.
The most likely plaintiffs, he said, would either be large dealerships who stock inventories of replacement harnesses or move a sizable volume of marked-up vehicles each year, or smaller dealers who can be swayed by eager plaintiff law firms into joining class actions.