China fines Toyota finance arm for alleged bribery

[September 21, 2010]  SHANGHAI (AP) -- Authorities in eastern China say they have fined Japanese automaker Toyota Motor Corp.'s finance unit for giving bribes to car dealers -- a charge the company is disputing.

The accusation comes at a time of rising tensions between China and Japan and amid Toyota's effort to counter the impact of massive recalls on its sales in China by offering steep discounts and other incentives to potential buyers.

The bribes took the form of rebates meant to encourage dealers to have customers use loans from Toyota, rather than banks, to finance car purchases, Jiang Zhugen, an official at the Jianggan Administration for Industry and Commerce in the eastern city of Hangzhou, said Tuesday.

"We sent the hearing notice on last Friday, and Toyota should have received it yesterday. The final penalty decision will be made after three working days if the company does not submit an application for another hearing," Jiang said. The charges are administrative rather than criminal.

Jiang refused to give more details about the case or say how much Toyota Finance will be fined.

"It's hard to tell at this moment," he said.

The official Xinhua News Agency reported that authorities would fine the company 140,000 yuan ($20,650) and have confiscated 426,352 yuan ($65,500) in "illegal earnings" from 49 car sales.

Relations between Japan and China have been on a downward spiral over the detention of a Chinese fishing captain nearly two weeks ago after his boat collided with Japanese vessels near disputed islands.

The tensions appear to be spilling into other areas, such as tourism, with cancellations of visits to both sides, though it is too early to tell how much impact they might have on broader business ties.

Toyota and its joint ventures in China sold just over 500,000 vehicles in January through August, up 22 percent from a year earlier.

Calls to the public affairs section of Toyota's China headquarters in Beijing rang unanswered Wednesday morning. The company's headquarters in Japan said it was looking into the case.

A staffer at Toyota Motor Finance (China) Co., who like many media-shy Chinese would only give her surname, Zhang, said Toyota charges interest rates of up to 10 percent, more than 3 percentage points higher than the rate normally charged by commercial banks.

She disputed the allegation that rebates were a form of bribery, saying they were service fees paid to the dealers for introducing customers to Toyota's finance unit.

[Associated Press]

AP Business Writer Yuri Kageyama in Tokyo and researcher Ji Chen contributed to this report.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.