Magna under investigation by U.S. Justice Department
Auto parts giant Magna International announced Thursday that one of its subsidiaries is under investigation by U.S. anti-trust investigators, something analysts say is part of a broader probe spanning car parts companies in Europe, North America and Japan.
In a statement released before markets opened, the Aurora-based company said the U.S. Department of Justice had asked for documents related to a subsidiary of its Cosma International division as part of a probe into the auto tooling industry.
“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 statement said.
A Magna spokesperson wouldn’t answer any further questions, citing the ongoing investigation.
A spokesperson for the Department of Justice confirmed an investigation is taking place, but wouldn’t provide any other details.
“I can confirm that the Department of Justice is investigating the possibility of anti-competitive practices in the automotive tooling industry,” said the DoJ’s Gina Talamona.
The investigation isn’t likely to have a significant impact on Magna’s bottom line unless it turns out other parts of the company are also being investigated, according to David Tyerman, a research analyst at Canaccord Genuity Corp.
“Nothing at all’s been proven yet, but if it turns out this was a pervasive way of doing business across the company, that would be much more of a problem for Magna,” said Tyerman, adding that Magna’s tooling operations are a relatively small part of the company’s overall business.
“Tooling only represents about 8 per cent of Magna’s revenue, and probably even less of their profits, because traditionally, tooling equipment is sold at cost. They make more of their money on parts,” said Tyerman. Tooling equipment is used to make molds and dies for auto parts.
“They’ve historically said tooling is a low margin or no margin business,” agreed another auto industry analyst.
Several other auto parts companies have announced over the last year that they’re being probed by anti-trust authorities in North America, Europe and Japan.
Last month, Japan’s Furukawa Electric agreed to plead guilty to charges it had been engaging in price-fixing and bid-rigging over a 10-year span. The company agreed to pay a $200-million (U.S.) fine, and three executives will serve prison time in the U.S.
“It seems that this is really part of a much wider investigation which has been going on since at least the beginning of 2010,” Tyerman said of the Magna probe.
Source: Toronto Star