Kobe Steel blames data scandal on focus on profit, lack
of controls
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 [November 10, 2017]
By Yuka Obayashi and Kentaro Hamada
TOKYO (Reuters) - Kobe Steel Ltd said on
Friday a lack of quality controls and a focus on profits was behind the
widespread data tampering that has shaken up the supply chains of car
and plane makers around the world.
Japan's third-largest steelmaker, which has posted losses in the last
two business years, promised to automate more of its operations and
reorganize its quality control systems to recover from one of the
nation's biggest corporate scandals.
The 112-year-old company admitted last month that workers had tampered
with product specifications, causing global automakers, aircraft
manufacturers and other companies to check whether the safety or
performance of their products had been compromised.
No safety issues have so far been identified from the data cheating,
which mainly involves falsely certifying the strength and durability of
products.
Kobe Steel was ordered last month by the Ministry of Economy, Trade and
Industry (METI) to provide a detailed explanation of the data cheating
and say what steps it would take to prevent future abuses.
"Improving our management and corporate governance and instilling a
culture where employees can say anything are imperative," Chief
Executive Officer (CEO) Hiroya Kawasaki said at a press briefing after
submitting its report to the government. "This is my utmost priority and
I will work on these with unflagging resolve," he said.
Kawasaki said his "ultimate management responsibility" will be decided
after recently appointed outside investigators report back to the
company.
"Given the magnitude of the scandal, we expect upper management to get
the boot," Thanh Ha Pham, an analyst at Jefferies in Tokyo, wrote in a
note on Friday, without saying when that might happen.
Multiple workers and managers at nine production sites were involved in
tampering data on specifications of products, the company said in its
internal report.
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Kobe Steel President and CEO Hiroya Kawasaki bows as he meets with
Director-General of Manufacturing Industries Bureau of Ministry of
Economy, Trade and Industry, Akihiro Tada at the ministry in Tokyo,
Japan, November 10, 2017. REUTERS/Toru Hanai
Some of the fabrication of data went on for 10 years, Managing Executive
Officer Koji Yamamoto said, though he could not say when exactly it
started.
The company is in talks with fewer than 10 customers who want to recover
the costs of safety inspections, Managing Executive Officer Yoshihiko
Katsukawa said.
"Clarifying your company's thinking on the causes of this incident is a
meaningful step towards restoring trust," Akihiro Tada, director general
of METI's manufacturing industries bureau, told Kawasaki as he arrived
to deliver the report.
Kobe Steel, also subject of a U.S. Justice Department inquiry as well,
has had a Japanese government-sanctioned seal of quality revoked on some
of its products and lost customers.
As of Friday, the company said 474 out of 525 affected customers found
no safety issues or their products were deemed safe by Kobe Steel, up
from 470 earlier this week.
The company has said it cannot yet fully state what impact the tampering
will have on its finances. Last week, it pulled its forecast for its
first annual profit in three years for the 12 months through next March.
Kobe Steel's shares have fallen by nearly a fifth since it revealed the
data fabrication a month ago.
The company's shares rose nearly 2 percent on Friday, while the Nikkei
225 fell 0.8 percent.
(Additional reporting by Taiga Uranaka; Writing by Aaron Sheldrick;
Editing by Chang-Ran Kim and Tom Hogue)
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