The Car and Truck Fleet and Leasing Management Magazine

Safety & Accident

Feds Indict Automotive Exec for Seat Belt Price Fixing

June 13, 2014

A former executive at Takata Corp., a Tokyo-based manufacturer of automotive parts, has been indicted on charges he participated in a conspiracy to fix prices of seat belts.

The U.S. Department of Justice announced the indictment of former Takata executive Gikou Nakajima on June 5. The charges, filed in the U.S. District Court for the Eastern District of Michigan, accuse him of participating in a conspiracy to suppress and eliminate competition in the auto parts industry. He allegedly agreed to rig bids and fix prices of seat belts sold to Toyota, Honda, Nissan, Mazda, Fuji Heavy Industries (Subaru) and their subsidiaries. These seat belts were eventually installed in vehicles sold in the U.S. and elsewhere.

From June 2005 through at least June 2009, Nakajima served as director of Takata’s customer relations division. He was the highest-level global sales executive at the company. During this time, Nakajima was actively involved in the conspiracy and also directed his subordinates to participate, according to the Department of Justice.

Takata conducts some of its business with U.S. automakers through an American subsidiary, TK Holdings Inc., located in Auburn Hills, Mich. This month, the company also made headlines because of faulty air bag inflators that have prompted safety recalls.

In December of last year, Takata pleaded guilty for its involvement in the price-fixing and bid-rigging conspiracy. The company was sentenced to pay a criminal fine of $71.3 million, the DOJ said.

Four other Takata executives have already pleaded guilty and have been sentenced to serve time in a U.S. prison. They also must pay criminal fines for their roles in the conspiracy.

A total of 35 people, including Nakajima, have been charged in the government’s ongoing investigation into price fixing and bid rigging in the auto parts industry. Of those, 24 have pleaded guilty or agreed to plead guilty. Twenty-two have been sentenced to serve prison terms ranging from one to two years.

Additionally, 27 companies have pleaded guilty or agreed to plead guilty and have consented to pay a total of more than $2.3 billion in fines, the DOJ said.

Nakajima is charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. The maximum fine, however, may be increased to twice the gain derived from the crime or twice the loss suffered by the crime’s victims -- if either of those amounts is greater than $1 million.

Nakajima’s indictment resulted from an investigation conducted by four of the Antitrust Division’s criminal enforcement sections and the FBI.

Meanwhile, Nakajima’s former company is also under heightened scrutiny this month for its role in safety recalls.

Toyota Motor Sales USA on June 11 announced plans to revisit an April 2013 safety recall involving Takata-manufactured front-passenger air bag inflators installed in several vehicle models. Last year, the supplier had provided an incomplete list of all the faulty inflators that needed fixing, Toyota said.

The 2013 recall included 766,300 2003-2004 model-year Corolla, Corolla Matrix and Tundra vehicles; 2002-2004 Sequoia SUVs and 2002-2004 Lexus SC 430 coupes.

Last year’s recall involved inspection of the front-passenger air bag. Based on that inspection, dealer mechanics determined whether to replace the inflator with a newly manufactured one at no charge to the vehicle owner.

In the newly announced expanded recall, Toyota dealers will replace all of the older inflators with new ones.

This new recall includes 2003-2004 Pontiac Vibes manufactured by a Toyota-General Motors joint venture. GM dealers will handle the replacement part installations in the Vibes. The recall addresses both the passenger-side frontal air bags originally installed in the vehicles as well as replacement air bags, the National Highway Traffic Safety Administration said. More than 844,000 vehicles are involved.

The added caution was spurred by the discovery that the front-passenger air bag inflators might have been assembled with faulty propellant, which could trigger inflator rupture and air bag malfunction during a crash.

If an air bag does rupture, metal fragments could strike and seriously injure the vehicle occupants, NHTSA said.

Other automakers are also investigating whether they too need to recall more vehicles, Reuters reported. The defective air bag inflators in question were manufactured from September 2001 to September 2002 at Takata’s plant in Mexico.

Toyohiro Hishikawa, a spokesman for Takata, told the New York Times on June 12 that the company has informed multiple automakers of the air bag inflator problems. Whether they issue additional recalls is up to them, he said.

NHTSA is looking into the matter to determine whether more recalls are warranted.

This isn’t the first time Takata-manufactured auto parts have raised safety questions affecting multiple automakers. Back in 1996 seven automakers, along with General Motors and Chrysler, recalled 8.8 million vehicles in the U.S. because of defective safety belt buckles. At the time, this was the largest automotive recall in U.S. history, the New York Times reported

Takata eventually settled a number of lawsuits tied to the issue.

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