Finger pointing amid auto supplier price-fixing allegationsFinger pointing amid auto supplier price-fixing allegations

The FBI also looked for documents from Aurora, ON-based Magna International Inc., and in Europe, the European Commission made "unannounced visits to Lear Corp., TRW Automotive Holdings's occupant safety systems division and a subsidiary of Autoliv Inc. in Germany," said the Automotive News report.

In an October press release, Magna announced that it was cooperating with the DOJ with respect to its ongoing antitrust investigation of the automotive tooling industry. "In connection with such investigation, 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 a Tier 1 tooling supplier," said Magna's release. "Magna's policy is to comply with all applicable laws, including antitrust and competition laws, and we are fully cooperating with the DOJ."

Chad Halcom and Dustin Walsh, in the Nov. 1, 2011 online report at www.autonews.com, asked a good question: Why is all this price fixing collusion among automotive suppliers happening? And they had a good answer:

"Blame the automakers"

Ask any mold supplier or molder out there and they'll tell you what a cutthroat business supplying automotive molds and plastic components really is. The primary reason is that the big OEMs continually put pricing pressures on all their suppliers, starting with Tier 1's who in turn squeeze the Tier 2 suppliers, which include many mold making and molding companies.

Halcom and Walsh quote Richard Hilgert, automotive equity analyst for Chicago-based Morningstar Inc., who believes that "the price fixing is a result of the automakers' own pricing pressures. 'These suppliers, they've been beaten over the head for years, margins are razor thin,' Hilgert said.'"

That pricing pressure is evident in an editorial that appeared in the Oct. 10, 2011 online issue of SupplierBusiness, an IHS company, whose headline read "Toyota to suppliers - reduce prices or face being replaced."

In July of 2011, the annual IHS SupplierBusiness supplier relations survey "suggested that relations between suppliers and OEMs had generally deteriorated over the past 12 months. Toyota in particular had suffered in the rankings, so much so that it ceded its position a having the best relationships with its suppliers to Porsche, dropping to third position behind Honda."

Is that any way to develop long-term supplier relationships? Who do all these big automotive OEMs think their suppliers are? Walmart? I certainly haven't seen any mold manufacturers offering any "Blue Light Specials" lately!

There was rumor last year that the big automotive OEMs were becoming a "kinder, gentler" lot, given that their pressure tactics, refusals to make down payments or progress payments on molds, demand rebates on purchase orders that were a year old and other arm-twisting methods had put some Tier 1 suppliers in bankruptcy and many Tier 2 suppliers - molders and moldmakers - out of business. As a result the supply base has dwindled.

"Al Capone School of Supplier Relations"

I talked recently to a family member of a good-sized molder and mold supplier, out of business for more than a year now, who to this day is angry and bitter about what the big automotive OEMs in Detroit did to his family's once-thriving business that employed more than 300 people at its peak. "[The big automotive OEM] pilfered our business like a bunch of pirates, wreaked havoc on my family," he said angrily. "[The automotive industry] is almost a terrorist activity. It's a ruthless operation."

I have to agree with Halcom and Walsh in their assessment of the forces behind the price fixing problems in the automotive industry. The pressures brought to bear on automotive suppliers sound like something from the "Al Capone School of Supplier Relations." Is it any wonder that some suppliers will do whatever it takes to maintain their business within the automotive industry and try to make a profit doing it?