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.


EU and China vow to uphold global trade order despite disagreements

Updated 29 min 20 sec ago
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EU and China vow to uphold global trade order despite disagreements

BEIJING: The European Union and China pledged on Monday to uphold a rules-based international trade system, making an oblique criticism of growing protectionism in Washington despite their own disagreements.
The two sides held high-level economic meetings in Beijing as both face rising trade tensions with the United States. Brussels and Beijing recently announced new tariffs on US goods in retaliation for moves by the Trump administration.
“Both sides agreed to resolutely oppose unilateralism and protectionism and prevent such practices from impacting the world economy and even dragging the world economy into recession,” said Chinese Vice Premier Liu He, responsible for shepherding the world’s second largest economy.
Liu had led China’s three rounds of trade talks with the US, negotiations that have broken down over the Trump administration’s pledge to move forward with tariffs despite an agreement in May to put the duties on hold.
“Unilateralism and trade protectionism is on the rise and tensions have appeared in the economic relations between major economies,” Liu told an audience of European and Chinese officials.
European Commission Vice President Jyrki Katainen echoed Liu’s words, describing the World Trade Organization “as the center of the rules-based international trading system.”
Even as the two sides seek common ground on combating the US moves, there are deep divisions between them. EU companies and officials harbor concerns about Beijing’s policies that are shared by their counterparts in Washington.
“We need more than just talk, we need to demonstrate adherence to international trading rules,” said Katainen, proposing reforms to develop new rules for a “global level playing field” in key areas such as “industrial subsidies.”
Beijing’s industrial policies such as the “Made in China 2025” project, which is designed to transform China from a maker of sports shoes and denims into high-tech goods, is a major concern in Washington and stands at the heart of proposed new US tariffs on China.
“The two sides committed to defend the multilateral trading system that is centered on the WTO and based on rules,” said Liu, acknowledging the need to maintain fair market access.
Katainen called on Liu to go further in removing market access barriers for companies and preventing overcapacity in high-tech sectors “covered by the Made in China 2025 strategy.” He demanded that all industries enjoy equal treatment.