Nissan pays back suppliers after Japan antitrust probe

TOKYO -- Nissan Motor Co. has paid back suppliers after Japan’s Fair Trade Commission alleged it shortchanged them about $20 million in an illegal cost-cutting scheme dating back years.

Japan’s No. 3 automaker withheld full payments to more than 30 subcontracted parts makers, shaving several percent off the agreed-upon contract price, Japanese media reported Monday.

The commission was preparing to issue a public warning against Nissan and recommendations on preventing a repeat of the practice, the media reports said.

An official at the nation’s antitrust watchdog said an announcement was not far off. “All I can say is that what is reported about Nissan is not false,” Koichi Nishikawa said in a phone call.

Nissan confirmed it was under investigation by the commission and said it had repaid suppliers.

“We are awaiting the final judgments by the Japan Fair Trade Commission, which investigated some of our business translations with suppliers that allegedly violated the Subcontract Act,” the carmaker said in a statement. “Subsequently, we have returned the appropriate amount to relevant suppliers. At this time, we decline further comment.”

Nissan may have been shortchanging Japanese subcontractors on full payments for decades, according to several local media reports citing unidentified officials at the nation’s antitrust watchdog.  

Withheld payments totaled about 3 billion yen ($19.9 million), according to the Nikkei newspaper and the country’s Kyodo and Jiji news agencies. It is the biggest shortfall in such contract payments since 1956, when Japan’s subcontractor law was implemented, the reports said.

Under that law, it is illegal to unilaterally withhold payment to subcontractors after amounts are agreed to, unless there are justifiable grounds such as defective work or breach of contract.

Nissan, known among suppliers for its often assertive and contentious approach to negotiations, has been especially focused on cost control in recent years since the arrest and ouster of former Chairman Carlos Ghosn threw the automaker into a tailspin.

But the belt-tightening stretches back as far as 1999, when Ghosn first landed at Nissan, then teetering on the brink of bankruptcy, and began blowing up its bloated supply chain.

Subcontractors affected by the scheme included tire and wheel makers, Japanese media said. They were afraid to complain for fear of losing Nissan’s business, the reports said.

One supplier was shortchanged $6.66 million, according to Jiji.

Over the past decade, Nissan has consistently ranked near the bottom of the U.S. industry in relations with suppliers, according to the closely watched Supplier Working Relations Index published annually by Plante Moran. In 2023, it overtook Ford for the first time since 2014. But it still trailed Toyota, Honda and General Motors and ranked in the “poor-very poor” category.

Nissan’s score bottomed out in 2018 and has increased annually since 2020.