Kobe re­port blames profit tar­gets for qual­ity scan­dal

The Daily Telegraph - - Business - By Alan Tovey

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.

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