You knew the auto price-fixing probe was huge -- but not like this

Chad Halcom is the legal beat reporter for Crain's Detroit Business, an affiliate of Automotive News.

DETROIT -- It was more than a casual comment this week when, outgoing Acting Assistant Attorney General Sharis Pozen, in charge of the U.S. Department of Justice Antitrust Division, let it drop to reporters that the "auto parts investigation is the largest antitrust investigation the (department) has ever pursued."

It's already bucking for that top spot right now, with just three companies taking pleas and agreeing to fines out of what is likely dozens of auto suppliers under investigation. Based on a history of the fines collected by Justice in recent collusion probes, the auto suppliers' case could easily double the sum the feds have collected from any other American industry before it wraps.

The $470 million fine "agreed to but not yet paid" by Tokyo-based Yazaki Corp. under a plea agreement to be formalized at U.S. District Court in Detroit is the second-largest fine ever imposed on a single company, according to a compilation of nearly 100 of its largest fines going back to 1995.

It trails only F. Hoffmann-LaRoche Ltd., the Swiss healthcare company that houses its U.S. headquarters in San Francisco, which paid $500 million in 1999 as part of a Justice prosecution of the makers of several forms of vitamins and livestock feed.

The vitamin probe began with FBI cooperation with a whistleblower in 1997 and ultimately yielded $899.5 million across a total eight European and Japanese companies in 1999-2000, according to Justice data.

Airlines case

That still pales in comparison to the $1.87 billion collected between 2007 and late last year from 21 companies in the air transportation industry all over the world, making that the largest single-industry prosecution for the department.

The air investigation stemmed from a 2005 notification to Justice by Deutsche Lufthansa AG and uncovered a massive price-fixing scheme among airlines and cargo carriers to inflate passenger and cargo fuel surcharges between 2000 and 2006 to offset lost profits. Fines fell heavily on British Airways plc, Korean Airlines Co. and Cargolux Airlines International SA, to name a few.

With Yazaki and Kariya, Japan-based Denso Corp. (which houses its Denso International America Inc. subsidiary headquarters in Southfield) agreeing Monday to $548 million in combined fines, the auto price-fixing probe to date totals $748 million in fines.

It could be $791.2 million, if you were to count federal fines imposed late last year in San Francisco on California distributor Maxzone Vehicle Lighting Corp. and Sabry Lee USA Inc., the U.S. distributor for Taiwanese producer Sabry Lee Ltd. But that's an aftermarket auto supplier industry probe, which Justice is pursuing separately.

More to come

But wait.

This week J.P. Morgan North American Equity Research reiterated a forecast that the as-yet-uncharged Autoliv Inc. (visited by the European Commission in Germany last summer as part of the global investigation) and TRW Automotive Holdings Corp. (also searched in Europe) could ultimately pay fines of $700 million and $400 million respectively.

Those two companies alone would put the auto price-fixing total close to $1.9 billion -- assuming none of the other companies cooperating with the investigation are charged or fined.

And none of this counts the $165 million-plus in total fines levied earlier this month by the Fair Trade Commission in Japan against Yazaki, Fujikura Electric Co. and wire harness global market leader Sumitomo Electric Industries Ltd.

JP Morgan notes that Justice's fines against three companies to date are coming out to roughly 8 percent of revenue in the companies or the affected industry segments of their business, and is calling Autoliv and TRW's fines on a "10 percent of revenue" rule of thumb.

"(T)hese fines have only been limited to the U.S. … and it is unclear if the global fine would be higher given that other global regulatory bodies may also follow suit…," the Morgan report states.

"We are sensing that the resolutions to these antitrust investigations are accelerating and we may learn about the potential fines levied on TRW and (Autoliv) soon."

Assessing the damage

The wire harness supplier base, only one known industry segment within the global investigation, had $29 billion in 2010 worldwide revenue according to Ireland-based tech analyst firm Research and Markets -- so we could be looking at $2.3 billion or so just for all the companies in that segment, including the $200 million already imposed on Furukawa last fall.

And wire harness fines wouldn't cover Denso, or TRW and Autoliv as companies in the auto safety systems industry segment of the federal probe. So even hedging a little on JP Morgan's forecast, or attributing some to other countries, we could see the industry total top $3 billion in U.S. fines.

Morgan Stanley Research, in an industry report last November, estimated the ongoing global probe "covers several components/end-markets within the auto sector and we believe (it) includes up to 80 suppliers" in at least five specific industry segments of the auto supply chain.

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