Isuzu Motors reportedly said on Friday authorities had ordered it to correct the way it pays parts makers after revelations that it had violated subcontracting laws, Reuters reported.
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According to the report, the restructuring truck maker, owned 12% by General Motors, said it had been procuring parts from suppliers before agreeing on a price, making monthly payments in the meantime at a tentative price set by the supplier.
Reuters said Isuzu and the parts makers usually agreed on a final price after one or two months, and in some cases illegally lowered the price of the goods retroactively.
The Fair Trade Commission ordered Isuzu to halt the practice and issued a separate warning on delayed payments, the report added.
An Isuzu spokeswoman told Reuters she could not specify how long the practice had been in place but said the commission’s mandate on the lowering of unit prices covered 56 parts makers.
Laws ordering companies to pay subcontractors on time are routinely ignored in Japan, leading to bankruptcy at many small suppliers which are often forced to take out loans just to keep operating, Reuters noted.
The news agency said the law requires companies to pay by cash or cheque within 60 days of receiving a product but cheques need only to clear within four months, meaning the latest payment can be received after six months of services rendered.
Isuzu said it would review and improve its method of procurement and payment to ensure future compliance, Reuters said.
