Magna International being investigated by U.S. Justice Department
October 18, 2011 by Sunny Freeman The Canadian Press
Magna International Inc. is being investigated by the U.S. Justice Department on an antitrust matter in the auto tooling industry.
The company said that it was co-operating with the investigation, which centres on tooling contract bids by its Cosma International unit. Cosma produces vehicle body and chassis systems, and provides vehicle engineering services.
Magna spokeswoman Tracy Fuerst said the company takes these matters “very seriously,” saying it was notified of the investigation “recently” and disclosed it “promptly.”
“We do not anticipate any interruption in providing our customers with the highest quality products and servicing the global automotive industry,” Fuerst added.
Magna has never been investigated by the Justice Department before, but requests for information are “relatively common for companies in our industry,” Fuerst said.
Fuerst said she could not comment further, nor were any additional details released.
David Tyerman, an auto parts industry analyst with Genuity Capital, said it appears the Magna investigation is part of a broader Justice Department crackdown into anti-competitive activities in the auto parts industry that began in early 2010.
“There are a number of players caught up,” he said.
The department has also investigated other well known auto parts suppliers, including Japanese companies involved in electronics, and safety companies such as TRW Automotive and Auto Leave.
One of those companies, Furukawa Electric Co., entered into a plea bargain at the end of last month in which it was fined $200 million and had three executives sent to jail.
In the agreement, the company acknowledged “the allegations in the criminal proceeding relating to cartel activities with certain competitors for the automotive wire harness and related products.”
Tyerman said accusations against Furukawa included bid rigging and price fixing, meaning collusion between two parties to fix the price of contracts.
The Department of Justice also investigated the industry in 2007.
The penalties can be severe — from millions of dollars in fines to jail time for executives.
But even if Magna were to be found guilty on a similar accusation, Tyerman doesn’t see the repercussions as a long-term problem for the company, which is growing again after a painful period when its auto industry customers restructured their North American business.
“The way I would see this being problematic is if the fine was much larger than $200 million,” Tyerman said.
“The only other thing is if there was systemic substantial bribery, fraud or whatever, throughout Magna and it reached through a lot of the organization, that could be a problem.”
Magna said that “the DOJ has requested documents related to various tooling bids, including a tooling program for which a subsidiary within our Cosma International operating unit acted as Tier 1 tooling supplier.”
“Magna’s policy is to comply with all applicable laws, including antitrust and competition laws, and we are fully co-operating with the DOJ,” the company said.
Magna is Canada’s largest auto parts maker, with 104,000 employees in 26 countries.