Editor's note: An earlier version of this story incorrectly said auto-parts supplier Sumitomo has acknowledged its involvement in bid-rigging via a plea agreement with the U.S. Department of Justice. Sumitomo has made no such admission. Earlier versions also incorrectly said the Ford lawsuit refers to Sumitomo Corp.; the suit refers to Sumitomo Electric Industries Ltd.
In March 2009, Ford Motor Co. asked suppliers to bid for a contract to provide wire harnesses for the Ford Fusion and Lincoln MKZ.
It should have been an attractive proposition for two high-volume sedans. But, oddly, some suppliers weren't interested, Ford says in a federal lawsuit.
The bid of supplier Fujikura Ltd. was "completely non-competitive," the suit says, while Sumitomo Electric Industries Ltd. and some other unnamed harness suppliers refused to bid at all.
In retrospect, that was an early clue that something was rotten in the state of wire-harness suppliers. This July, outsiders got a glimpse of just how rotten when the automaker sued Fujikura in U.S. District Court in Detroit.
The automaker claims Fujikura and other co-conspirators named in the suit --Yazaki Corp., Sumitomo and Furukawa Electric Co. -- engaged in price-fixing over the Fusion and MKZ contract.
The lawsuit is intriguing because it offers a glimpse of high-stake negotiations that normally occur behind closed doors. And it raises interesting questions about Ford's legal strategy. For instance: Why did Ford sue a supplier that did not get the Fusion and MKZ contract?
Unbeknownst to Ford, Fujikura and some other wire-harness suppliers had agreed that Yazaki and "certain other co-conspirators" would bid on the Ford contract, according to the lawsuit.
Since the four largest wire-harness suppliers, which Ford does not specify, controlled 77 percent of the global market in 2009, prospects looked bleak for a robust round of bidding, the suit says.
Wire harnesses are networks of wires that carry electricity from the battery or alternator to the radio, headlights, dashboard display and other electrical devices.
To keep prices high, Ford claims, the suppliers also limited their production capacity, a tactic made possible by the relative lack of competition. Ford does not reveal the amount of the contract.
Ford says it spent $10 billion to purchase wire harnesses in the United States and elsewhere for all Ford vehicles from Fujikura's co-conspirators during the conspiracy period, which "lasted from at least as early as January 2006 to 2010."
The suit reveals more bad news: Despite its legions of purchasing experts, Ford says it could not determine what a wire harness ought to cost.
In 2006, the automaker had asked suppliers to specify the cost of each harness component, along with labor costs and overhead. According to Ford, Sumitomo and some other suppliers resisted.
And even when vendors did supply that information, Ford says it could not independently verify the cost of subcomponents purchased by the wire-harness makers. In addition, some wire-harness suppliers make their own copper wire, and Ford could not assess its true cost easily.
According to the lawsuit, Ford awarded its contract in October 2009 to an unnamed supplier. Ford says it discovered the bid-rigging conspiracy when everyone else did, after Feb. 24, 2010, the day that regulators in Europe, Japan and the United States raided the offices of wire-harness companies. Japanese officials raided Yazaki, Sumitomo and Furukawa, Ford's suit says.
Since then, Fujikura, Yazaki and Furukawa have acknowledged their involvement in bid-rigging via plea agreements with the U.S. Department of Justice.
Over the past three years, regulators in the United States, Europe and Japan have conducted probes of alleged price-fixing schemes among other companies supplying a range of auto parts. Within the wire-harness industry, Fujikura's co-conspirators collectively have agreed to pay $670 million in fines in the United States.
We may have to wait awhile for additional revelations. A Ford spokesman, declining further comment, told Automotive News that the lawsuit "speaks for itself."
A Fujikura spokesperson did not respond to an e-mail request last week to comment for this report.
That leaves unanswered questions.
n First, Ford sued a supplier that did not get the wire-harness contract. Does Ford plan to sue a company that did? Or will Ford seek compensation in negotiations behind closed doors?
n Second, will Ford sue suppliers in other product segments -- such as safety systems, instrument clusters, electrical components -- in which suppliers have admitted price-fixing in the current global investigation of auto suppliers?
Michael Brady, a litigation expert with Warner Norcross & Judd, a Grand Rapids, Mich., law firm, speculates that Ford may file additional lawsuits as the Justice Department wraps up its probes of other product sectors.
n Third, can we expect other automakers to sue? When Fujikura pleaded guilty last year, the company confessed that its bid-rigging activities had victimized Subaru. Undoubtedly, the list of victims doesn't stop there.
Under U.S. law, a plaintiff can seek triple damages against a supplier that engaged in bid-rigging. Damages are the difference between an honestly bid contract and one inflated by anticompetitive practices.
The threat of triple damages is a powerful tool of the Sherman Antitrust Act. Brady says: "It's a huge hammer."