9 Japanese suppliers, 2 execs to plead guilty in U.S. price-fixing probe
Feds levy $740 million in new fines on supply chain
WASHINGTON -- Nine Japanese auto suppliers and two executives have agreed to plead guilty to conspiracy charges and pay more than $740 million in fines for their roles in rigging the prices of 30 products for vehicles built or sold in the United States and elsewhere, the U.S. Department of Justice said today.
During a press conference today in Washington, top Justice officials told reporters that price-fixed parts were sold to Chrysler, Ford and General Motors, as well as to the U.S. subsidiaries of Honda, Mazda, Mitsubishi, Nissan, Toyota and Fuji Heavy Industries, parent company of Subaru. The conspiracies raised the cost of parts put into more than 25 million vehicles sold to U.S. consumers, U.S. Attorney General Eric Holder said.
"As we have uncovered each auto part conspiracy, we have continued to find more and more parts that are involved," Holder said. "And I will repeat: our work is not yet done. We will continue to check under every hood and kick every tire to make sure we put an end to this illegal and destructive conduct."
The charges today were the latest and largest developments in a broad global investigation of auto supplier price fixing and bid rigging. European and Japanese regulators have also been investigating. European regulators raided six companies earlier this week as part of their probe.
With more than $1.6 billion in fines levied to date on auto suppliers since September 2011, the Justice Department probe has already become the largest criminal antitrust investigation in the agency's history -- and its scope is still growing.
Civil lawsuits are also starting to work their way through the U.S. courts to win restitution for the victims of price-fixing conspiracies, which slammed car companies with higher costs that were ultimately passed along to customers.
According to the Justice Department, the nine price-fixing schemes that led to guilty pleas today affected $5 billion in parts used in the 25 million vehicles. That translates to about $200 in parts per car, but agency officials would not say how much lower that price might have been had without conspiracy.
While the probe has centered on Japanese suppliers, Justice Department investigators will not say whether they expect the prosecutions to spread to U.S. and European companies.
Scott Hammond, a deputy assistant attorney general, told reporters today he could not comment on that point due to the ongoing investigation, but noted that Swedish and German suppliers have already been prosecuted.
Those companies are Sweden-based Autoliv Inc. and Germany-based TRW Deutschland Holding GmbH.
"I can't provide you with any hints," Hammond told reporters, "but I can tell you that the investigation involves producers of auto parts around the world."
Hammond thanked the Japanese Fair Trade Commission, a government anti-trust body, which he said provided some of the tips that led to today's charges.
"The Japanese Fair Trade Commission has coordinated with the DOJ on its investigation and will continue to coordinate with it," the Japanese embassy said in a statement.
List of guilty pleas, fines
Including those announced today, 20 companies and 21 executives in the United States have been charged in the U.S. government's ongoing investigation. All 20 companies have either pleaded guilty or have agreed to plead guilty and have agreed to pay more than $1.6 billion in criminal fines. Seventeen of the 21 executives have been sentenced to serve time in U.S. prisons or have entered into plea agreements calling for significant prison sentences.
The companies' and executives' agreed-upon fines and sentences are:
- Hitachi Automotive Systems to pay a $195 million criminal fine.
- Jtekt Corp. to pay a $103.27 million criminal fine.
- Mitsuba Corp. to pay a $135 million criminal fine.
- Mitsubishi Electric Corp. to pay a $190 million criminal fine.
- Mitsubishi Heavy Industries to pay a $14.5 million criminal fine.
- NSK to pay a $68.2 million criminal fine.
- T.RAD Co. to pay a $13.75 million criminal fine.
- Valeo Japan Co. to pay a $13.6 million criminal fine.
- Yamashita Rubber Co. to pay an $11 million criminal fine.
- Tetsuya Kunida, a Japanese citizen and former executive of a U.S. subsidiary of a Japan-based automotive anti-vibration rubber products supplier to serve 12 months and one day in a U.S. prison, and to pay a $20,000 criminal fine.
- Gary Walker, a U.S. citizen and former executive of a U.S. subsidiary of a Japan-based automotive products supplier to serve 14 months in a U.S. prison, and to pay a $20,000 criminal fine.
"These international price-fixing conspiracies affected more than $5 billion in automobile parts sold to U.S. car manufacturers, and more than 25 million cars purchased by American consumers were affected by the illegal conduct," U.S. Attorney General Eric Holder said in a statement.
"The Department of Justice will continue to crack down on cartel behavior that causes American consumers and businesses to pay higher prices for the products and services they rely upon in their everyday lives."
Today's multi-company announcement is the largest so far in a wide-ranging price fixing investigation that has spanned from Europe to Asia and involved multiple regulators.
Each of the companies charged today colluded with other unnamed co-conspirators, the department said. The companies and executives attended meetings and spoke by phone to rig bids for auto parts, using code names and meeting in remote locations to keep their activities secret, investigators said.
Automakers that paid inflated prices for parts have been "very cooperative," Hammond said.
"They are, of course, victims, and they're very concerned, no doubt, about how this has affected their ability to compete and sell cars to U.S. consumers," he said. "We're talking about an industry with very tight margins. When you have fixed prices on automotive parts that results in higher manufacturing costs, you don't have any trouble getting the attention of the victims."
According to the charges filed in U.S. District Court in Detroit:
- The department said MELCO and Hitachi conspired with each other and other suppliers on sales of starter motors, alternators, and ignition coils and other parts.
- Mitsuba and Mitsubishi Electric conspired together and with other companies to fix prices of starter motors.
- The department said Hitachi and others conspired for at least a decade to fix the prices of parts it sold to Ford, GM, Honda, Nissan and Toyota, including starter motors, alternators, air flow meters, valve timing control devices, fuel injection systems, electronic throttle bodies, ignition coils, inverters and motor generators.
- Mitsuba and others conspired for at least a decade to rig bids for windshield washer systems and components, windshield wiper systems and components, starter motors, power window motors, and fan motors it sold to Chrysler, Honda, Subaru, Nissan and Toyota, investigators said.
- Mitsuba also agreed to plead guilty to one count of obstruction of justice, because of the company's efforts to destroy evidence ordered by a high-level U.S.-based executive after learning of the ongoing U.S. antitrust investigation.
- MELCO agreed to plead guilty to charges it conspired to rig bids for starter motors, alternators and ignition coils it sold to Chrysler, Ford, GM, Honda, Fuji Heavy Industries Ltd. (Subaru), Nissan, and others for over a decade.
- Investigators said Mitsubishi Heavy Industries conspired to fix prices of compressors and condensers it sold to GM and Mitsubishi Motors North America in the United States and elsewhere between at least 2001 and 2010.
- T.RAD agreed to plead guilty to a charge that it conspired to fix the prices of radiators it sold to Toyota and Honda and automatic transmission fluid warmers it sold to Toyota as far back as November 2002.
- The department said Valeo Japan conspired with others to rig bids for air conditioning systems it sold to Nissan, Suzuki and Subaru from at least April 2006.
Supplier, customer responses
"We've cooperated fully with the Department of Justice and have concluded our discussions. We accept the terms of the plea agreement and are now focused on moving forward," Cayce Blanchard, a spokeswoman for Mitsubishi Electric in California, said in an e-mailed statement.
Valeo Japan, a unit of French supplier Valeo SA, said in a statement it "acknowledges its participation in certain anti-competitive practices in the market for air conditioning systems and components, which were in violation of U.S. antitrust law." The company also said it "commits to continue its cooperation with the DoJ with respect to the DoJ's on-going investigation concerning the same market."
Hitachi, in a statement, said it is "committed to comply with all applicable antitrust laws or competition laws by instituting several measures to prevent recurrence, including strengthening of internal guidelines, educational training sessions for employees by utilizing manuals etc. and the occurrence of audits at regular intervals." The company noted is is already under a cease-and-desist order issued by Japanese antitrust authorities on Nov. 22, 2012.
GM, in a statement responding to the charges, said:
"GM expects its suppliers to conduct business in a fair, transparent and lawful manner. We are greatly concerned by the large number of suppliers in the automotive supplier sector who have pled guilty to serious criminal price fixing charges filed by the U.S. Department of Justice.
"This evidences a culture of anti-competitive activity among a cross section of suppliers in the automotive sector, including some suppliers with which GM does business. This is unacceptable, and we will take appropriate action where necessary. However, we are not in a position to comment on specific suppliers or public reports at this time."
Ford said in an e-mailed statement that it "continues to monitor and review the ongoing Department of Justice anti-trust investigations. We have nothing further to announce at this time."
Chrysler Group declined to comment on the investigation.
Japanese automakers hit
The Justice Department also filed the following charges in U.S. District Court in Cincinnati:
- Jtekt Corp. agreed to plead guilt to charges it conspired to rig bids for bearings it sold to Toyota and electric powered steering assemblies it sold to Nissan as far back as 2000 and as late as October 2011, investigators said.
- NSK was charged with one count of conspiring to fix the prices of bearings it sold to Toyota from 2000 until July 2011.
The Justice Department also filed the following charges in U.S. District Court in Toledo:
- Yamashita Rubber was charged with one count of conspiring to rig bids for automotive anti-vibration rubber products it sold to Honda Motor Co., American Honda Motor Co. and Suzuki Motor Corp. from April 2003 to May 2012.
In previous actions as part of the ongoing investigation, DENSO Corp., Nippon Seiki Ltd., Tokai Rika Co. Ltd., Furukawa Electric Co. Ltd, Yazaki Corp., G.S. Electech Inc., Fujikura Ltd., Autoliv, TRW Deutschland, Diamond Electric Mfg. Co. Ltd., and Panasonic Corp., have already pleaded guilty.
Fifteen individuals have been sentenced to pay criminal fines and to serve prison sentences ranging from a year and a day to two years each.
Sean Gagnier and Andrew Thurlow contributed to this report.
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