DETROIT -- We've been hearing for a while that the impending global prosecution of automotive suppliers for alleged price-fixing would fan out far beyond Japanese wire harness maker Furukawa Electric Co.
On Monday, we got another projection on just how far -- although the big surprise of the day is that Furukawa itself may not be in the clear.
Representatives of Furukawa appeared before U.S. District Judge George Steeh in Detroit to formalize the agreement first announced Sept. 29 with the U.S. Department of Justice, to plead guilty and pay a fine of $200 million by next spring, plus a nominal special assessment fee of $400.
All told, the damage is nearly one-fourth of the estimated $839 million in total Furukawa sales to U.S. manufacturers during the period it allegedly colluded with other suppliers, between early 2000 and January 2010.
But the formal plea agreement as signed by Tetsuya Sato, managing director of the Furukawa board, specifically excludes Shuji Hayashida -- who was CEO of U.S. subsidiary American Furukawa Inc. for most of the alleged collusion period -- any government protections offered under the plea.
Hayashida has not been charged. He was president of the Plymouth, Mich.-based subsidiary starting in 2001 and was replaced by Kazuhisa Sakata in 2010, according to documents filed with the Bureau of Commercial Services, an agency of the Michigan Department of Licensing and Regulatory Affairs.
The government as a condition of the plea agrees not to "bring criminal charges against any (other) current or former director, officer or employee of (Furukawa and its subsidiaries) that was undertaken in furtherance of an antitrust conspiracy involving the manufacture or sale of automotive wire harnesses," but adds that the protections for those employees who cooperate "shall not apply to Shuji Hayashida… ."
The only other carve-outs named in Justice's cooperation and protection agreement are Hirotsugu Nagata, 46, (former CFO and general manager of sales at American Furukawa), along with Junichi Funo, 41, (assistant general manager of Honda sales at American Furukawa until 2009), and Furukawa executive Tetsuya Ukai, who have already been charged and entered pleas.
Japan's Fair Trade Commission last year raided Furukawa's Tokyo offices, along with those of wire harness market leader Sumitomo Electric Industries Ltd. and Yazaki Corp. Around the same time, the FBI investigators raided the suburban Detroit offices of Yazaki North America Inc., Denso Corp., and Tokai Rika Group North America.
The FBI also sought documents last month from Magna International Inc., and over the summer the European Commission made unannounced visits to Lear Corp., TRW Automotive Holdings Corp.'s occupant safety systems division, a subsidiary of Autoliv Inc. in Germany, and a European office of Delphi Corp. Delphi formed a wire-harness joint venture with Furukawa in 2004, which was ended in 2010.
The probe may have extended beyond wire harnesses to safety systems to tooling and suppliers of automotive ball bearings, said Ravi Shanker, vice president and lead equity analyst at Morgan Stanley Research for the North American automotive industry.
Morgan Stanley Research concluded the ongoing criminal probe "covers several components/end-markets within the auto sector and we believe (it) includes up to 80 suppliers at this time," according to a report completed two weeks ago.
The 80-company estimate is across all four known supplier industry segments, Shanker said. The investment consulting service projects an 18-24 month "overhang" weighing down valuations of publicly traded companies in the affected industries, though some who were named early on in the investigation may be nearly out of the woods.
"We're coming up on 24 months pretty soon for some of the companies, but for others it really could be a while. That depends on exactly the nature of the investigation," he said.
"If all the investigations are treated as one big case, it could be that all the companies could see more certainty soon in the markets. But these aren't very homogenous markets, and it could vary with the quality of information the (justice department) has on each of these companies."
Shanker also said the ratio of the Justice Department fine on Furukawa to its total revenue in the market also may not reflect how the feds intend to treat the other supplliers. The plea agreement states, however, that the maximum fine Furukawa could have paid under federal guidelines exceeds what it actually will pay.