Carmakers open up wounds by complaining to authorities, says SupplierBusiness. But did parts makers engage in illegal collusion or was it a natural evolution of business strategy?
The first reports allegedly claimed that a reporter on the phone with a Denso official was interrupted when the executive suddenly cried out: “I can’t talk now; we’re being raided by the FBI.” Simultaneously, reports began to suggest that federal investigators were paying surprise visits to auto suppliers around the United States.
Text messages crisscrossed the country as panic set in. Executives were asking: ‘Am I next?’ Rumours spread that U.S. government officials were investigating Toyota-controlled parts makers in what was the latest escalation of the global safety scandal now dogging the Japanese automaker.
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The initial reaction: U.S. authorities were trying to uncover evidence of safety problems being hidden at Toyota’s suppliers. After all, CTS, the maker of the recalled pedals on eight Toyota models, was among those that were supposedly raided.
But it turns out CTS was not raided and that the investigations had nothing to do with Toyota and its faulty accelerator pedals. Indeed, it took a full day to understand what was really going on – that a globally co-ordinated antitrust raid was taking place in Europe, America and Japan aimed at suppliers of wiring harnesses; the cables and connectors that route electronic information throughout the car.
Investigators were instead looking for evidence that companies had improperly divided up business with automakers, and they were focusing on electronic equipment.
“Market division […] is a concern of ours,” admitted one senior U.S. OEM purchasing executive, who nonetheless claimed his company had not triggered the investigation.
The rumour last week was that the probe originated in Europe, the result of several European OEMs coming together to bring a complaint to the European Commission. Whatever, the investigation sent a shock wave through the U.S. supplier community.
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By GlobalDataThe fear is that the investigation could take OEM-supplier relations into a dangerous new era of distrust. While carmakers accuse suppliers of not playing fair, suppliers worry that carmakers are merely trying to cut costs on commodity goods.
One European carmaker is said to have failed to attract competitive bids for wiring harnesses, leading the company to join with other carmakers to take the complaint to the EU.
“Wire harnesses are generally considered the central nervous system of a car, linking the car’s computers to the various relevant functions in the vehicle,” the European Commission said in its announcement about the investigation.
Experts say the involvement of the FBI suggests a criminal investigation of collusion between companies not to compete. ‘Market division’ involves deals by which suppliers agree to produce different parts in different regions of the world and thus avoid direct competition.
Some observers note that the companies raided by the FBI don’t make the same products and don’t compete with each other.
European Commission investigators visited several suppliers, including Leoni AG of Germany. Continental said SY Systems Technologies GmbH, a 50:50 joint venture between Continental and Japan’s Yazaki Group, is also under investigation. SY Systems said it is cooperating with investigators.
Seat supplier Lear said it was notified by the European Commission that it is part of an investigation into anticompetitive practices among automotive electrical and electronic component suppliers.
“Lear is co-operating fully with the European Commission in their investigation, and I am confident that our company is not involved in any anticompetitive practices,” said Bob Rossiter, Lear’s CEO. Bosch and Valeo said they were not involved in the EU investigation.
“The Commission has reason to believe that the companies concerned may have violated European Union antitrust rules that prohibit cartels and restrictive business practices,” an EU official said in a statement.
Besides Denso, the FBI also said it raided the U.S. of Tokai Rika Co., another Toyota affiliate, and privately held Yazaki.
“The antitrust division is investigating the possibility of anti-competitive cartel conduct of automotive electronic components suppliers,” Gina Talamona, Deputy Director of Public Affairs for the Department of Justice in Washington, said. “We are co-ordinating with the European Commission and other foreign competition authorities.”
In Japan, investigators searched the offices of Yazaki, Furukawa Electric and Sumitomo Electric Industries and several other Japanese electric cable makers over suspected collusion. U.S. officials have refused to disclose the specific reasons or timing behind the raids.
But industry officials were concerned that the auto industry’s own way of maintaining equilibrium – not through collusion but with corporate strategies that naturally line up with what others are doing – may be the target.
Indeed, a successful prosecution could change the way the supplier industry operates.
This article was supplied to just-auto by SupplierBusiness, an IHS Global Insight company.
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