Hyundai vs. Toyota, complete with espionage
Engineer spilled quality secrets
Mark Rechtin | | Automotive News / November 27, 2006 - 1:00 am
LOS ANGELES -- It made perfect sense when Hyundai Motor hired a veteran Toyota engineer named Bruce Shibuya in 2003 to run its quality control unit in Chino, Calif.
After all, Hyundai was on a fanatical quest to raise the quality and reliability of its vehicles. What better place to find a quality expert than Toyota?
Shibuya, an American, had worked at Toyota Motor Sales U.S.A. Inc.'s headquarters in Torrance, Calif. But as much as Hyundai benefited from Shibuya's 18 years of Toyota experience, it may have learned more from the secret company documents he brought along with him.
Shibuya, given the title of vice president, Hyundai-Kia North American Quality Center, arrived with a passel of materials detailing Toyota's quality procedures. During his three years at Hyundai's America Technical Center, Shibuya often gave PowerPoint presentations emblazoned with the Toyota logo, according to Hyundai sources and a recent lawsuit.
Shibuya's actions were so galling to Hyundai engineers that one of them anonymously leaked word of it to Toyota this year. In response, the Japanese automaker fired off a cease-and-desist letter to Hyundai. Shibuya, 50, was terminated at Hyundai in August.
Kathy Parker, vice president of human resources at Hyundai Motor America, said Hyundai executives took action immediately upon hearing from Toyota. She said an internal investigation led to Shibuya's dismissal. All relevant documents were returned to Toyota. "Only a handful" of documents were involved, Parker said.
'Do not duplicate'
But some Hyundai insiders, as well as a whistle-blower suit filed by a Hyundai employee, tell a different story.
Hanna Kim, Shibuya's former executive assistant, contends in the suit, filed Nov. 17, that Shibuya ordered her to make copies of numerous Toyota documents and mail them to Hyundai headquarters in Korea. The lawsuit also alleges sexual harassment by Shibuya against Kim.
Kim alleges she complained to upper management about copying Toyota documents that included the words "Do Not Duplicate." Kim was told that if she "didn't stir up anything," she would be promoted, according to the lawsuit, filed in Orange County (Calif.) Superior Court.
Shibuya, Hyundai Motor America and Hyundai-Kia America Technical Center are named as defendants.
Added a Hyundai source: "It was not a few documents. It was binders and binders of information." The individual spoke anonymously for fear of reprisal from the company.
Although Hyundai sources were hesitant to give details about the stolen trade secrets, one said, "It was technical reports and their European quality-control model."
It was high-protein stuff, said another Hyundai employee. "This wasn't just paint codes," he said. "This was something that should have been kept confidential."
Hyundai sources say they reported Shibuya's actions to superiors, who did nothing to stop it. Only when Toyota's lawyers pounced in March 2006 with a "nasty-gram," as one source referred to it, did Hyundai take action.
Even then, Hyundai's internal investigators seemed more interested in determining who contacted Toyota than in discovering how much information was stolen, sources said.
Parker strongly denied that characterization: "Our focus was on correcting the situation," she said.
The stolen Toyota documents would not have helped anyway, she said, because Hyundai's quality engineering processes do not mesh with the Toyota system.
Shibuya did not return phone messages left at his home.
Toyota spokesman Xavier Dominicis said Toyota employees sign a nondisclosure agreement regarding confidential information. "It extends after their employment," Dominicis said. "All information remains the property of Toyota. We treat the information as privileged." But he said no litigation has been filed against Hyundai and none is planned.
Toyota declined to make legal or engineering executives available for comment. Dominicis said the automaker does not comment on individual personnel issues. "If Toyota wanted to take action against a former employee, I suppose we could," he said. "It depends on how egregious the violation is."
Growing problem
Law enforcement sources say corporate espionage cases - like those of recently indicted former executives at Metaldyne Corp. - are part of a growing problem. This year a federal grand jury indicted three ex-Metaldyne executives for plotting to steal the company's secret process for manufacturing parts from powdered metal. The 64-count indictment said the trio planned to sell the intellectual property to a Chinese company.
No criminal charges have been brought against Shibuya.
"We are definitely seeing an increase in these kinds of cases," said Terrence Berg, first assistant U.S. attorney in Detroit, who is handling the Metaldyne case. "The intensity of the competition, not just in the auto industry but any manufacturing industry, requires that people and companies need that certain edge."
For one thing, internal documents flow more readily these days. E-mail and information storage technologies such as flash drives make it easier for proprietary information to walk out the front door.
