Toyota faces a lawsuit by an important member of the vehicle maker’s supply chain.
In a newly filed lawsuit, Japan-based Nippon Steel Corp. has alleged that Toyota used stolen technology for steel material in its electric motors. The patent infringement case was filed this month in Tokyo District Court and also names Boashan as a defendant, alleging Toyota continued to buy from Baoshan even after it was told that the Chinese company engaged in patient infringement.
The suit comes after Toyota and Nippon had maintained a long-time business partnership, and during a time in which suppliers are feeling the pinch of rising materials costs that are affecting the whole supply chain. Nippon Steel may also be taking issue with Toyota entering into a new agreement with a rival steel supplier.
Nippon Steel’s suit contends that the Boashan infringed on a patent for a material used in the steel sheets that make up the core of some electric car motors, and that Toyota creating these in its vehicles despite the stolen technology. The Japanese steelmaker sought an injunction to “prevent the manufacture and sale of Toyota vehicles that use motors” with its steel, according to court documents, as well as “damages equivalent to about $176 million.” It is seeking the same from Baoshan.
Toyota has responded, indicating that it checked with Baoshan regarding the Nippon’s allegations and was assured by the company that it did not do what Nippon had accused it of. The car company believes it should be removed from the court case altogether and that the other two companies should work out a deal between the two of them. “We have learned of this lawsuit with great regret,” Toyota said, saying it values its partnership with Nippon.
These types of cases, in general, between vehicle manufacturers and members of their supply chains, are very rare. Depending on the outcome of the case, the relationship may not be restored, which could mean that Toyota may have to strike a deal a new provider.
Japan’s prime minister, Fumio Kishida, has pleaded with companies to stop what he calls “bullying of suppliers,” saying, “Profits are not being distributed properly in the supply chain.”
Tanh Ha Pham, a Tokyo-based steel analyst for Jefferies, added, “Until now, Nippon Steel was a very Japanese company, respectful of these relationships with customers, and Toyota was the emperor. But Nippon Steel has a new sheriff in town, the president Hashimoto. He’s picking a fight with Toyota.” Since taking the job in 2019, Hashimoto has been shutting down plants and older production lines in Japan to increase profits.
In 2020, Nippon announced it would spend approximately $1 billion, upping production of steel sheets by around 40%, with Toyota was supposed to be its prime customer. The tables have now turned in a big way in a very short amount of time. The company hoped to keep selling its steel to Toyota despite the lawsuit, with company spokesperson Tsuyoshi Yoshizumi saying the legal action was “necessary to protect its intellectual property,” and adding, “We have various transactions with Toyota, and the fact that it is an important customer of ours will not change.”