Japan Inc scandals widen as Toray admits cheating
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[November 28, 2017]
By Sam Nussey and Makiko Yamazaki
TOKYO (Reuters) - Japan's Toray Industries
Inc <3402.T> on Tuesday revealed 149 cases of quality data falsification
at a materials-making subsidiary spanning eight years, in the latest
quality-assurance scandal to hit a Japanese manufacturer.
The world's largest maker of carbon fiber composite materials said the
cheating involved products including tire-strengthening cords sold to 13
clients by Toray Hybrid Cord Inc. A broader probe into possible
wrongdoing across the group was ongoing.
Toray did not name any affected customers but ruled out U.S. aircraft
maker Boeing Co <BA.N>, for which the Japanese company is a major
supplier of carbon fiber used in passenger jets, and Uniqlo parent Fast
Retailing Co Ltd <9983.T>, which uses its products in its best-selling
Heattech clothing line.
Japanese companies are facing growing pressure to disclose
quality-assurance failings after widespread data falsification was
uncovered at Kobe Steel Ltd <5406.T>.
Toray said its subsidiary became aware of its problems in July last
year, and the group learnt of them in October. It only decided to
publicly disclose the cheating after rumors appeared earlier this month
in an anonymous online post.
"There were no legal violations or safety problems; this was between us
and our customers, and so there was no need to disclose it," Toray
President Akihiro Nikkaku told a news conference.
The internet post forced the company to "give a proper explanation
before rumors spread", Nikkaku said, adding that even if similar cases
were found in the future the company would not be required to make them
The comments are likely to fuel concerns about Japanese manufacturers'
governance and their commitment to stamp out cheating.
Last week Mitsubishi Materials Corp <5711.T> admitted that it may have
sent products with falsified data to scores of customers, and possibly
continued to ship these products for months after the wrongdoing was
Automakers Nissan Motor Co Ltd <7201.T> and Subaru Corp <7270.T> have
also been hit by compliance scandals.
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Toray Industries' president, Akihiro Nikkaku attends a news
conference in Tokyo, Japan, November 28, 2017. REUTERS/Issei Kato
The admissions threaten to damage trust in Japan's manufacturing industry at a
time of growing competition from its Asian neighbors such as China and South
Toray's shares plunged more than 8 percent following the announcement and closed
down 5.3 percent in a flat broader market.
While Toray is not among the most-recognized Japanese brands internationally,
its strong, light carbon fiber materials are used in Boeing's 777X passenger jet
and 787 Dreamliner.
The company is represented at the heart of Japan's conservative corporate
establishment, with former president Sadayuki Sakakibara heading the Keidanren
Toray said it was in the process of notifying clients about the falsification
and had not heard back from them about performance or safety issues with the
fiber products used to strengthen tires and other industrial goods.
The affected customers were mostly in Japan but included at least one in South
Two quality control managers had led the falsification, motivated partly by
pressure to meet product delivery targets. The two managers responsible for the
cheating have been transferred to different positions.
Toray found the cases after an in-house survey pointed to the malpractice,
prompting an internal investigation which Nikkaku said he hoped to complete by
March next year.
Combined revenue of the 149 cases amounted to 150 million yen ($1.35 million)
and would not have a big earnings impact, Nikkaku said.
($1 = 111.2400 yen)
(Reporting by Sam Nussey and Makiko Yamazaki; Editing by Stephen Coates)
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