China's recently instigated push to go after price fixing and monopolistic practices in the automotive sector has garnered a lot of ink, but regulatory bodies around the world have been tackling the issue for years. Lithium-ion battery makers were targeted in 2012, the US Department of Justice hit a cabal of Japanese suppliers for $740M in 2013 and Toyo Tires after that, the EU went after exhaust parts makers earlier this year. Nor are the investigations confined to the auto industry: aluminum purchasers like Coca-Cola sued banks over reducing supply to drive up prices and railway company Deutsche Bahn is suing US airlines over cargo prices.
Automaker execs speaking to Reuters say that price-fixing isn't new and that, while Japanese companies have been taking huge public hits, "that's not the exception, but the typical business condition we deal with routinely around the world." In Singapore, such collusion among parts makers was so structured and refined that they collectively called it the Market Share and Profit Protection Initiative. And wherever it's been practiced, it's worked – the Reuters report notes that parts suppliers not only keep prices high for the manufacturers, they then charge up to ten times more for replacement parts - the exact same parts - for dealer service centers and repair shops. That's given some suppliers better profit margins than the automakers they supply.
What everyone is waiting to see is whether the investigations and fines will lead the suppliers to change their business models, swapping conspiracy for "low cost and high quality" via leaner production processes.
Automaker execs speaking to Reuters say that price-fixing isn't new and that, while Japanese companies have been taking huge public hits, "that's not the exception, but the typical business condition we deal with routinely around the world." In Singapore, such collusion among parts makers was so structured and refined that they collectively called it the Market Share and Profit Protection Initiative. And wherever it's been practiced, it's worked – the Reuters report notes that parts suppliers not only keep prices high for the manufacturers, they then charge up to ten times more for replacement parts - the exact same parts - for dealer service centers and repair shops. That's given some suppliers better profit margins than the automakers they supply.
What everyone is waiting to see is whether the investigations and fines will lead the suppliers to change their business models, swapping conspiracy for "low cost and high quality" via leaner production processes.
Sign in to post
Please sign in to leave a comment.
Continue