Nine Japanese auto suppliers and two executives have agreed to plead guilty and pay more than $740 million in fines for participating in a price fixing conspiracy, the U.S. Department of Justice said yesterday. The two executives, one an American citizen, the other Japanese, will have to serve prison terms. According to the DoJ, thirty different components were involved and they were sold to all three domestic automakers as well as the U.S. operations of Honda, Mazda, Mitsubishi, Toyota and Fuji Heavy Industries, which owns the Subaru brand. The automakers have cooperated with the investigation. More than 25 million vehicles sold in the U.S. were affected by the conspiracy, raising costs to automakers and consumers alike, U.S. Attorney General Eric holder told a press conference in Washington yesterday.
The guilty pleas were the most significant development yet in a global investigation of price fixing and bid rigging by automotive suppliers. European authorities raided six companies earlier this week and Japanese regulators are involved as well. In a statement, the Japanese embassy in Washington said, ”The Japanese Fair Trade Commission has coordinated with the DOJ on its investigation and will continue to coordinate with it.”
The investigation is the largest criminal antitrust probe in the U.S. DoJ’s history, with more than $1.6 billion in fines levied so far, with civil lawsuits for financial losses as well working through the legal system. The nine schemes involved in the guilty pleas raised the prices of $5 billion worth of parts in those 25 million vehicles, about $200 per car, though the DoJ did not indicate how much the conspiracies netted.
The investigation may continue spreading to companies based in the U.S. and Europe. Swedish based Autoliv Inc. and a German company, TRW Deutschland Holding GmbH, have already been prosecuted. Previously, 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 also pleaded guilty, with 15 individuals sentenced with fines and prison sentences.
So far 21 individuals and 20 companies have been charged as part of the larger investigation. All of the companies have either pleaded guilty already or reached agreements with prosecutors to do so. Seventeen of the 21 executives have either been sentenced to or entered into plea agreements that involve significant prison time. It remains to be seen what would happen if any of these cases actually end up in a courtroom in front of a jury. Critics of prosecutorial overreach have been vocal about the tendency for prosecutors to pile up charges specifically to encourage plea bargains with no trials. The guilty pleas by the suppliers obviously mean that the accused would rather not take their chances explaining to juries made up of consumers how their actions didn’t really raise the prices of automobiles. When federal prosecutors do take cases to court, they win well more than 90% of their cases.
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.
According to the DoJ, each of the guilty companies had unnamed co-conspirators. There were meetings and phone conversations using code names and remote locations used to rig bids.
The specific charges concerning the parts involved were filed in three different U.S. District Courts. In Detroit, the following companies were charged:
• 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.
• Hitachi and others conspired for at least a ten years 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 will plead guilty to one count of obstruction of justice. A high ranking U.S. based executive of the company ordered evidence destroyed when he found out about the federal antitrust probe.
• 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 at least 10 years.
• Mitsubishi Heavy Industries conspired to fix prices of air conditioning compressors and condensers it sold to GM and Mitsubishi Motors North America in the United States and outside the U.S. for a decade.
• 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 since November 2002.
• Valeo Japan conspired with others to rig bids for air conditioning systems it sold to Nissan, Suzuki and Subaru.
The Justice Department also filed charges in U.S. District Court in Cincinnati:
• Jtekt Corp. agreed to plead guilty to charges it conspired to rig bids for bearings it sold to Toyota and electric power assisted steering components that it sold to Nissan.
• NSK was charged with one count of conspiring to fix the prices of bearings it sold to Toyota.
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 anti-vibration rubber products it sold to Honda Motor Co., American Honda Motor Co. and Suzuki Motor Corp.