Two Japanese suppliers of automotive electrical components –Yazaki Corporation and Denso Corporation with strong ties to the Japanese automakers Toyota and Honda – pleaded guilty for price fixing and bid-rigging conspiracies in the sale of parts to automobile manufacturers in the United States, the Department of Justice said late yesterday. All of the parts involved are essential to the wiring, circuit boards, gauges and fuel tanks of automobiles.
Justice said the non-unionized companies sold automotive electrical components to automobile manufacturers at inflated prices and engaged in meetings and conversations for the purpose of monitoring and enforcing adherence to the agreed-upon bid-rigging and price fixing scheme. This auto parts investigation is the largest criminal investigation the Antitrust Division has ever pursued, in terms of its scope and the potential volume of commerce affected by the alleged illegal conduct.
Yazaki has agreed to pay a $470 million – ~Y36 billion – criminal fine – the second largest criminal fine for a Sherman Act antitrust violation – and Denso has agreed to pay a $78 million criminal fine – about Y 6.1 billion. Four executives, all Japanese nationals, have also agreed to plead guilty and to serve time in the United States. The four executives from Yazaki – Tsunami Hanamura, Ryoji Kawai, Shigeru Ogawa and Hisamitsu Takada–will serve prison time ranging from 15 months to two years.
The two-year price fixing sentences would be the longest imprisonment imposed on a foreign national for a Sherman Act antitrust violation. The fine amounts and prison sentences are subject to court approval and the potential influence of the U.S. State Department, which based on previous actions, cares little – if at all – in my opinion about competitive aspects of the U.S. auto industry or its effects on workers and the U.S. economy. In fact it can be argued that since the end of World War Two, State has actively pursued policies that strengthen offshore competitors of U.S. firms at the expense of the U.S. middle class.
In a statement Yazaki said, ”in light of the seriousness of this matter and as a reflection of remorse, the directors shall return a part of their remuneration as follows – Yasuhiko Yazaki, Chairman 50% for 3 months; Shinji Yazaki, President 50% for 3 months. Denso Corporation’s chairman, president and some board members and executive directors will voluntarily return 30% to 10% of their compensation for a three-month period starting in February 2012.
According to court documents filed yesterday in U.S. District Court for the Eastern District of Michigan in Detroit, Yazaki, Denso, Hanamura, Kawai, Ogawa, Takada and their co-conspirators carried out the conspiracies by agreeing during meetings and conversations to allocate the supply of parts on a model-by-model basis and to coordinate price adjustments requested by automobile manufacturers in the United States and elsewhere.
According to a three-count felony charge, Yazaki engaged in three separate conspiracies:
- to rig bids for and fix, stabilize and maintain the prices of automotive wire harnesses and related products from 2000 through 2010;
- to rig bids for and fix, stabilize and maintain the prices of instrument panel clusters from 2002 through 2010;
- and to fix, stabilize and maintain the prices of fuel senders from 2004 through 2010.
All three conspiracies involved products sold to customers in the United States and elsewhere.
According to a two-count felony charge, Denso engaged in conspiracies to rig bids for and to fix, stabilize and maintain the prices of electronic control units (ECUs) and heater control panels (HCPs) sold to customers in the United States and elsewhere.
According to four separate one-count felony charges, Hanamura, Kawai, Ogawa and Takada each engaged in a conspiracy to rig bids for and to fix, stabilize and maintain the prices of automotive wire harnesses and related products sold to customers in the United States and elsewhere.
Justice said that the individuals participated in the conspiracies at various times from at least as early as January 2000 until at least February 2010. During the conspiracies, the individuals held the following positions:
- Hanamura was a branch manager at Yazaki North America in Columbus, Ohio, and a Honda division sales manager in Japan;
- Kawai was director of Toyota Sales of Yazaki North America in Lexington, Ky., and vice division head of Yazaki’s Toyota Business Unit in Japan;
- Ogawa was assistant section manager and later section manager in Yazaki’s Honda Business Unit in Japan, and branch manager in Yazaki’s Honda Sales Unit and later director at Yazaki North America in Columbus;
- Takada was assistant manager in Yazaki’s Toyota Business Unit, director of Yazaki North America in Lexington, and manager of a sales department of Yazaki’s Toyota Business Unit in Japan.
According to the plea agreements, which are subject to court approval, Ogawa and Takada have each agreed to serve 15 months in a U.S. prison. Hanamura and Kawai have each agreed to serve two years in a U.S. prison. Each of the four executives has also agreed to pay a $20,000 criminal fine.
According to the plea agreements, Yazaki, Denso, Hanamura, Kawai, Ogawa and Takada have all agreed to assist the department in its ongoing investigation into the automotive parts industry.
Including yesterday’s announcement, more than $748 million in criminal fines have been obtained in the investigation thus far, and the investigation is still ongoing. These fines already surpass the total amount in criminal fines obtained by the division for all of last fiscal year.
Furukawa Electric Company previously pleaded guilty and was sentenced to pay a $200 million fine for its role in the wire harnesses conspiracy and three of its executives also pleaded guilty. Two of the executives have been sentenced to serve prison time in the United States, and the third is scheduled to be sentenced next month.