Toyota Is Accused of Using Stolen Motor Technology in Rare Lawsuit

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Nippon Steel alleges patent infringement by Toyota in use of rival supplier’s materials; Toyota says it did nothing wrong

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Nippon Steel has long supplied the backbone material that goes into Toyotas sold around the world. More recently, Toyota has also been doing business with a rival supplier, Chinese steel maker Baoshan Iron & Steel. Co.

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of nippon steel Litigation in Tokyo District Court Names of both Toyota and Baoshan. It argues that the Chinese company infringed a patent for a material used in steel sheet that is native to some electric car motors, and that Toyota continued to buy from Baoshan even after it was told of the alleged infringement. .

The Japanese steelmaker sought an injunction preventing the manufacture and sale of Toyota vehicles that use motors with the material, as well as damages equivalent to approximately $176 million. He asked for the same amount from Baoshan.

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Toyota Said it’s checked With Baoshan whether the material of the Chinese company infringed any patents, and obtained written assurance that they did not. Toyota said Nippon Steel and Baoshan should have settled the matter among themselves.

“We learn of this lawsuit with great regret,” Toyota said. It described Nippon Steel as an important business partner.

Nippon Steel did not say which vehicles it wanted to cover by the injunction, and Toyota declined to say how its operations might be affected by the suit. Baoshan did not respond to a request for comment.

The suit is notable in the sense that it was also filed. Disputes between Japanese car manufacturers such as Toyota and their suppliers rarely go out in the open. For several decades, Japanese manufacturers have offered steady business from companies such as Nippon Steel in exchange for loyalty.

Now those relationships are under pressure. Japan’s new prime minister, Fumio Kishida, has called on large companies to stop bullying suppliers. “Profits are not being distributed properly across the supply chain,” he said in September.

Anger has flared up recently over who should bear the burden of rising iron ore prices.

In an August earnings news conference, Nippon Steel executives expressed frustration with the contracts that they said the supplier swallowed any increase in raw material costs. The company’s president, Eiji Hashimoto, has said that Japanese customers demand unfair terms compared to others.

Such expressions of discontent are unusual in Japan, said Tanha Ha Pham, a Tokyo-based steel analyst at Jefferies.

“Until now, Nippon Steel was a very Japanese company that respected these relationships with customers, and Toyota was the emperor,” Mr. Pham said. “But Nippon Steel has a new sheriff in town, President Hashimoto. He’s doing a fight with Toyota.”

Since taking office in 2019, Mr. Hashimoto has been closing plants and old production lines in Japan to increase profits. Meanwhile, he has doubled down on cutting-edge steel products, such as the electrical steel sheets that form the basis of Thursday’s lawsuit. The material forms the central core of an electric motor and involves a complex manufacturing process to make the steel highly conductive.

Last year, Nippon Steel announced that it would spend about $1 billion to increase production of these steel sheets by about 40%, with Toyota seen as a major customer for the part.

Nippon Steel said it wanted to continue selling Toyota despite the suit, which it said was necessary to protect its intellectual property. “We have several transactions with Toyota, and the fact that it is an important customer of ours will not change,” said Nippon Steel spokesman Suyoshi Yoshizumi.

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