TOKYO -- Japanese truck maker Isuzu Motors Ltd. said on Friday authorities had ordered it to correct the way it pays parts makers after revelations that it had violated subcontracting laws.
The restructuring truck maker, owned 12 percent by General Motors, said it had been procuring parts from suppliers before agreeing on a price, making monthly payments in the meantime at a tentative price set by the supplier.
Isuzu and the parts makers usually agreed on a final price after one or two months, and in some cases illegally lowered the price of the goods retroactively, it said.
The Fair Trade Commission ordered Isuzu to halt the practice and issued a separate warning on delayed payments.
A spokeswoman at Isuzu said she could not specify how long the practice had been in place. But she said the commission's mandate on the lowering of unit prices covered 56 parts makers.
Laws ordering companies to pay subcontractors on time are routinely ignored in Japan, leading to bankruptcy at many small suppliers which are often forced to take out loans just to keep operating.
The law requires companies to pay by cash or check within 60 days of receiving a product. But checks need only to clear within four months, meaning the latest payment can be received after six months of services rendered.
Isuzu said it would review and improve its method of procurement and payment to ensure future compliance.