Kobe report blames profit targets for quality scandal

SCANDAL-HIT Kobe Steel’s troubles were driven by a relentless focus on profits and the company’s regimented corporate culture, which led to more than a decade of faked quality guarantees on its products, an investigation has found.

Japan’s third largest steel-maker said it “sincerely and deeply apologised for the enormous amount of worry and trouble we have caused” as the findings of an investigation into its problems emerged.

A 27-page document detailing what went on inside Kobe – which has been loss-making for the past two years – said failed quality controls led to testing data being altered. The report stated that “a severe management environment” with demanding profit targets had contributed to the scandal.

The investigation into the issues that affected more than 500 customers – including those in the aerospace, transport and nuclear industries – was ordered by the Japanese government.

Customers of Kobe include Toyota and Nissan, along with international clients such as Boeing, General Motors and Daimler. The scandal – which affects aluminium, copper and steel products – has sent Kobe’s customers racing to check components acquired from the company, though no safety problems have yet been identified. In the wake of the report, Kobe has promised to transform itself with more automation and better quality controls.

In an update on checks into the affected products yesterday, Kobe said 474 of the 525 affected customers had not identified problems or Kobe had satisfied itself the products were safe.

After news of the scandal, Kobe’s shares plunged as much as 40pc, and Hiroya Kawasaki, its president, admitted that “trust in our company has fallen to zero”. Customers have been deserting the business, causing Kobe to scrap financial forecasts. Naoto Umehara, executive vice-president of Kobe, signalled that the scandal could kill the company, warning that it “may incur extraordinary losses”.

The report into the malfeasance at Kobe is just the latest of a string of scandals that have rocked corporate Japan, with companies including Nissan, Toshiba and Olympus also revealed to have suffered huge issues.