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Kobe Steel Chief Quits as Report Finds New Misconduct Cases

Of the new cases of malfeasance, which involve six Kobe facilities, the company said 163 customers have been affected.

Kobe Steel Ltd. President Hiroya Kawasaki will resign after Japan’s third-biggest steelmaker said an independent investigation into its faked data scandal found further instances of misconduct.

Kawasaki, 63, will step down April 1 and his successor will be selected in coming days, the company said in a statement Tuesday. Kobe’s executive vice president and chief of its aluminum and copper unit, Akira Kaneko, will also quit, while the post of executive chairman, which Kawasaki also holds, is to be abolished. The firm said it will overhaul its board so that at least a third are outside directors, one of whom will be elected chairman.

The 112-year-old company admitted in October it had misrepresented the strength and durability of parts sent to hundreds of customers from Toyota Motor Corp. to Boeing Co., sparking similar revelations from materials suppliers including Mitsubishi Materials Corp. and Toray Industries Inc. that have tarnished Japan’s manufacturing prestige.

Of the new cases of malfeasance, which involve six Kobe facilities, the company said 163 customers have been affected, with shipments to 129 of those verified as safe so far. Kobe’s earlier misconduct hit 525 customers, with 99% of those sales declared safe. Including overlaps, the total number of clients affected is 605, Kobe said.

Kawasaki joined the steelmaker in 1980 and became its president in 2013. While its shares tumbled more than 40% in October, they have since reclaimed much of that ground, and after a positive earnings report in February the company’s troubles had seemed to be behind it.

“Losing the trust of many of our customers is a matter of the deepest regret,” Kawasaki told a briefing in Tokyo, taking responsibility for misconduct around quality controls that the company says began as far back as the 1970’s.

An investigation into the scandal by the U.S. Department of Justice is ongoing. Kobe said last month that lost sales, compensation payments and legal costs would total about 10 billion yen (US$94 million), even as it reported a return to profitability in the third quarter. At the same time, the company reinstated its expectation of a full-year profit -- its first in three years -- after a rally in steel prices.

The external report, which was commissioned by Kobe, found that the aluminum and copper division was the only one of its eight units where executive officers were involved in the misconduct, which it blamed on an overemphasis on profitability, poor governance, and insufficient quality controls.

Kobe’s stock ended 0.1% higher in Tokyo after the Nikkei newspaper reported earlier that Kawasaki would step down.

By Masumi Suga and Ichiro Suzuki

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