The biggest names in the automotive industry are in hot water at the expense of their suppliers
On Monday, The New York Times published an investigation that revealed some major auto suppliers were at the center of an elaborate fraud scheme that saw them charge automakers up to $200 million to manufacture their products at their facilities in exchange for agreeing to meet certain production timelines.
The paper says that in many cases, the fraudsters had already paid off their suppliers to get those timelines back.
But it also says that the collusion that took place at some of these factories, where some suppliers were given up to two years to produce their products, is what’s keeping some of the biggest names from coming forward.
In some cases, those companies are among the biggest recipients of government subsidies and tax breaks for their equipment.
The report alleges that a few of these companies had already repaid the money to their suppliers, and that some of those companies also offered to make their equipment at their own facilities instead of in the United States.
One of the largest recipients of the subsidies is BMW of America, which in 2015 purchased an advanced vehicle-manufacturing facility in Chattanooga, Tennessee, from a group of companies led by a company called Kresge Automotive.
The Kresgens were supposed to use the facility for the production of a new BMW 3 Series sedan.
But in late 2018, they were caught cheating and moving their production to China, the company said in a statement to The Times.
“We’re deeply disappointed by these allegations and are investigating.
We are not aware of any wrongdoing by the Kresgas,” BMW of North America said.
The automaker’s chief executive, Harald Krueger, confirmed that BMW of the United Kingdom was part of the scam.
“This was a company that had already been involved in the scheme.
We have had discussions with the company about how to deal with this situation and have taken measures to reduce the exposure,” he said in an email to Business Insider.
A spokesperson for Kresgi Automotive said that it was not aware that BMW was a part of a scheme at the time and that it had been working with the government to resolve the matter.
“The Kresgen Automotive Group is a fully compliant and fully licensed automotive manufacturer in compliance with the Automotive Equipment Directive,” the company wrote in an emailed statement.
The company declined to provide further details.
The story is the latest in a series of allegations against some of America’s largest auto suppliers, many of which have been linked to government subsidies.
In October, The Washington Post published an expose detailing allegations that a company owned by Ford, General Motors and Chrysler used tax incentives to buy cars from a subsidiary of another company.
The firm also has been accused of helping to cover up a scandal involving its supplier, General Motor, which had been found to have improperly sold cars to automakers.
The scandal also has come to light after the New York State Attorney General’s office sued Fiat Chrysler Automobiles to recover $1.9 billion in state and federal subsidies that the automaker had awarded to suppliers of its vehicles.
Fiat Chrysler has not commented on the allegations.