Denso, Yazaki to plead guilty in supplier bid-rigging case, U.S. says
Yazaki to pay $470 million fine, Denso $78 million; 4 executives from Yazaki to serve prison time
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Yazaki Corp. and Denso Corp., two of Japan's largest auto-parts suppliers, have agreed to plead guilty in a widening multicontinent bid-rigging case, the U.S. Department of Justice said today.
Yazaki and Denso will pay a combined total of $548 million in criminal fines as part of a plea agreement, the department said in a statement. Four of Yazaki's Japanese executives also have agreed to plead guilty and serve prison time in the United States.
Denso was charged with conspiring to charge higher prices on heating-control panels and electronic control units. The Yazaki charges involved wire harnesses and related products.
Yazaki will pay a $470 million fine -- the second-largest criminal fine ever for a Sherman Act antitrust violation, according to the Justice Department. Denso will pay $78 million.
The four Yazaki executives were identified as Tsuneaki Hanamura, Ryoji Kawai, Shigeru Ogawa and Hisamitsu Takada. They have agreed to serve prison time ranging from 15 months to two years.
The two-year sentences would be the longest term of imprisonment imposed on a foreign national voluntarily submitting to U.S. jurisdiction for a Sherman Act antitrust violation, the Justice Department said. The fine amounts and prison sentences are subject to court approval.
Yazaki ranks No. 13 on the Automotive News list of the 100 top global suppliers, with total estimated sales to automakers of $12.5 billion during its 2010 fiscal year. Denso ranks No. 2 on the list, with total estimated sales to automakers of $32.9 billion during its 2010 fiscal year.
In a statement, Denso said it cooperated in the investigation and will continue to do so. The company said its chairman (Koichi Fukaya), president, certain board members and executive directors will voluntarily return 10-30 percent of their compensation for a three-month period beginning in February. Eight executives are taking the pay cuts, a company spokeswoman said.
"It is Denso's policy to comply with all applicable antitrust laws," a company statement said. "Since learning of the investigation in February 2010, DENSO has taken various measures, including implementing even more stringent compliance rules and even more enhanced compliance training to further ensure that its employees comply with all applicable antitrust laws."
Yazaki statement
Yazaki issued a written statement saying that it "has been faithfully cooperating with the DOJ investigation since its inception" in February 2010.
Yazaki said it will handle the charges with the "utmost seriousness" and promised to "strengthen its compliance activities worldwide."
Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice's antitrust division, said the actions of the two suppliers and the charged executives "harmed car buyers and auto manufacturers nationwide."
She declined to quantify the scope of the probe, but reiterated that the ongoing investigation is the largest criminal antitrust investigation in U.S. history in terms of the amount of commerce involved.
She said the investigation involves investigators and regulators in Detroit and Washington.
"Given the volume of commerce involved, there can be little doubt that it affected consumers," Pozen said. She declined to identify the automakers affected by the alleged price fixing.
Federal court documents filed today in Detroit say Yazaki, Denso, Hanamura, Kawai, Ogawa, Takada and unnamed others agreed to allocate the supply of products on a model-by-model basis and to coordinate pricing in the United States and elsewhere.
The documents say the defendants sold automotive electrical components to manufacturers at inflated prices and "engaged in meetings and conversations for the purpose of monitoring and enforcing adherence to the agreed-upon bid-rigging and price-fixing scheme," the Justice Department said.
Yazaki was charged with three felonies and was engaged in three separate conspiracies:
1. To rig bids for and fix, stabilize and maintain the prices of automotive wire harnesses and related products from 2000 through 2010.
2. To rig bids for and fix, stabilize and maintain the prices of instrument panel clusters from 2002 through 2010.
3. To fix, stabilize and maintain the prices of fuel senders from 2004 through 2010, the department said.
All three conspiracies involved products sold to customers in the United States and elsewhere, the Justice Department said.
Denso charges
Denso was charged with two felonies, Justice officials said, including engaging in conspiracies to rig bids for and to fix, stabilize and maintain the prices of electronic control units and heater control panels sold to customers in the United States and elsewhere.
Toyota Motor Corp. owns 23 percent of Denso.
The documents charge the four named Japanese executives each with a felony count of violating the Sherman Act, namely that "Hanamura, Kawai, Ogawa and Takada each engaged in a conspiracy to rig bids for and to fix, stabilize and maintain the prices of automotive wire harnesses and related products sold to customers in the United States and elsewhere."
The department said that the individuals participated in the conspiracies at various times as early as January 2000 until at least February 2010.
During the period:
• Hanamura was a branch manager at Yazaki North America in Columbus, Ohio, and a Honda division sales manager in Japan.
• Kawai was director of Toyota Sales of Yazaki North America in Lexington, Ky., and vice division head of Yazaki's Toyota business unit in Japan.
• Ogawa was assistant section manager and later section manager in Yazaki's Honda business unit in Japan, and branch manager in Yazaki's Honda sales unit and later director at Yazaki North America in Columbus.
• Takada was assistant manager in Yazaki's Toyota business unit, director of Yazaki North America in Lexington, and manager of a sales department of Yazaki's Toyota business unit in Japan.
Prison time
According to the plea agreements, which are subject to court approval, Ogawa and Takada each agreed to serve 15 months in U.S. prison, while Hanamura and Kawai each agreed to serve two years in U.S. prison. Each of the four executives agreed to pay a $20,000 criminal fine.
As part of their agreements, the two companies and the four executives agreed to assist the department in its ongoing investigation into the automotive parts industry.
Neil De Koker, CEO of the Original Equipment Suppliers Association, said today's plea agreements have his members on edge.
"I don't know what to make of it, but it's very worrisome," De Koker said, adding that his members have been wondering what investigators are looking at and what they're looking for.
"I'm dead certain that there has to be a lot of concern out there."
Today's plea announcement is the latest in a broadening investigation of alleged price fixing among automotive suppliers involving regulators on at least four continents.
Yazaki's record fine in Japan
On Jan. 19, the Japan Fair Trade Commission ordered Yazaki to pay a fine of some 9.6 billion yen ($125 million) for rigging bids with three other companies to supply wire harnesses to automakers, a record fine imposed on a single firm under the Japanese Antimonopoly Law, the Japanese Kyodo News Agency reported.
Sumitomo Electric Industries Ltd. was fined about 2.1 billion yen ($27.4 million) and Fujikura Electric Co. about 1.1 billion yen ($14.3 million).
The remaining company, Furukawa Electric Co., avoided any fine by reporting its anti-competitive practice to the fair trade commission before the anti-monopoly watchdog started investigating the matter, the Kyodo reported.
Starting around 2000, the four companies rigged bids to determine the winners of wire harness orders from Toyota Motor Corp., Daihatsu Motor Co., Honda Motor Co., Nissan Motor Co. and Fuji Heavy Industries Ltd., the fair trade commission said.
A wire harness is an assembly of cables that transmits electricity or information signals to the engine, power windows and other vehicle mechanisms.
Sumitomo has not been charged with anti-competitive behavior in the United States.
Furukawa charges
On Nov. 14, Furukawa pleaded guilty in the United States and was sentenced to pay a $200 million fine for its role in the wire harnesses price-fixing and bid-rigging conspiracy.
Three Furukawa executives also pleaded guilty. The court sentenced two of the executives to 15- and 18-month prison sentences, to be served in the United States. One of the executives is already incarcerated.
Sentencing of the third Furukawa executive, who agreed to serve a year and a day in prison in the United States, is scheduled for Feb. 28.
The nearly $750 million in fines that the Justice Department has so far negotiated in the global price-fixing probe are indicative of the amount of money involved, Pozen said.
"I think the numbers that we're talking about here are astronomical," Pozen said. Money collected from the fines goes to the Department of Justice's Crime Victims Fund, she said.
Pozen said suppliers that may have engaged illicit activity should view the latest plea agreements as a warning: "Our message to suppliers is that if you're going to rig bids and engage in price fixing, we're going to root you out with the help of the FBI and prosecute you."
DENSO STATMENT: Plea Agreement with the United States Department of Justice Concerning Certain Automotive Components
SOUTHFIELD, Mich. -- DENSO Corporation concluded a plea agreement with the United States Department of Justice (DoJ) on January 30, 2012 (U.S. Eastern Standard Time), agreeing to pay a fine of US$78 million (approximately 6.1 billion yen) based on charges that it violated antitrust laws in connection with sales of certain automotive components (specifically, certain body electronic control units [body ECUs] and heater control panels*) to one of its customers.
Since learning of the DoJ's investigation in February 2010, when the DoJ conducted an onsite investigation at the offices of DENSO International America, Inc. (DIAM), DENSO Corporation's North American headquarters, both DENSO Corporation and DIAM (collectively, "DENSO") have cooperated fully with the investigation. The plea agreement requires that they continue to do so.
The fine will have no material effect on the Company's financial forecast for the fiscal year ending March 31, 2012. The payment will be recorded as an extraordinary loss in the third quarter of the fiscal year ending March 2012.
It is DENSO's policy to comply with all applicable antitrust laws. Since learning of the investigation in February 2010, DENSO has taken various measures, including implementing even more stringent compliance rules and even more enhanced compliance training to further ensure that its employees comply with all applicable antitrust laws.
In addition, to emphasize the seriousness of these matters, DENSO Corporation's chairman, president and certain board members and executive directors will voluntarily return 30 percent to 10 percent of their compensation for a three-month period starting in February 2012.
DENSO is committed to compliance with all applicable antitrust laws around the world.
You can reach Larry P. Vellequette at lvellequette@crain.com.
