Kobe Steel says lack of quality controls, focus on profits to blame for data tampering

Chief Executive Officer Hiroya Kawasaki submitted the internal report on Friday to Akihiro Tada, director general of METI’s manufacturing industries bureau, before releasing the report publicly. (Reuters)
Updated 10 November 2017
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Kobe Steel says lack of quality controls, focus on profits to blame for data tampering

TOKYO: Kobe Steel 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 for at least a decade, 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 by the Ministry of Economy, Trade and Industry (METI) last month to provide a detailed explanation of the data cheating and say what steps it would take to prevent future abuses.
Chief Executive Officer Hiroya Kawasaki submitted the internal report on Friday to Akihiro Tada, director general of METI’s manufacturing industries bureau, before releasing the report publicly.
“Clarifying your company’s thinking on the causes of this incident is a meaningful step toward restoring trust,” Tada told Kawasaki as he arrived to deliver the report. “I look forward to getting a proper explanation.”
The company also appointed a trio of outside investigators who are due to report back by the end of the year. Sources have said that Kawasaki and other executives will decide whether to resign for the scandal happening on their watch only after the external report.
“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.
Kobe Steel, also subject of a US 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.


Abraaj gets $50m Abu Dhabi bid for investment management business

Updated 43 min 36 sec ago
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Abraaj gets $50m Abu Dhabi bid for investment management business

  • Abu Dhabi Capital Management's (ADCM) bid is well below the $125 million
  • Abraaj, which declined to comment on ADCM's offer, has debt estimated at more than $1 billion

ABU DHABI: An Abu Dhabi Financial Group company has made a conditional $50 million offer to buy private equity firm Abraaj's investment management business, a document reviewed by Reuters shows.
Abu Dhabi Capital Management's (ADCM) bid is well below the $125 million offered by New York-based Cerberus Capital Management before Dubai-based Abraaj filed for provisional liquidation in the Cayman Islands last week.
It was unclear whether the terms of the offer that Cerberus made were different from the one made by ADCM.
ADCM stated its terms in a letter to Abraaj's financial adviser Houlihan Lokey dated June 17, which said it will not buy any companies owned by Abraaj and its affiliates and will not assuume any liabilities.
Abraaj has been bruised by a row with four of its investors, including the Bill & Melinda Gates Foundation and International Finance Corp (IFC), in a $1 billion healthcare fund.
It has denied it misused the funds.
Abraaj Holdings said on Tuesday a court in the Cayman Islands ordered the appointment of PwC as provisional liquidators of Abraaj Holdings and Deloitte as provisional liquidators of Abraaj Investment Management Ltd., Abraaj's fund management business.
ADCM, an ADFG entity based in Cayman Islands, wants to become the General Partner of the limited partnerships, which have committed money to Abraaj's various private equity funds.
Abraaj acts as the general partner for these limited partnerships.
Some Gulf limited partners - ranging from financial institutions to pension funds and family businesses - in funds of Abraaj had asked ADFG to explore a buyout of Abraaj's investments business as they were concerned about their holdings, two sources familiar with the talks told Reuters.
Abraaj, which declined to comment on ADCM's offer, has debt estimated at more than $1 billion, sources have told Reuters.
Since the dispute went public early this year, Abraaj has split its investment management business and holding company, while its founder Arif Naqvi stepped aside from the day-to-day running of its private equity fund unit and the firm halted its investment activities.