Business / Corporate

Mitsubishi joins list of major Japanese companies rocked by scandals

Bloomberg, Kyodo

Japan’s reputation for manufacturing prowess took another hit this week after Mitsubishi Materials Corp. admitted it faked data on some products just weeks after a similar scandal engulfed Kobe Steel Ltd.

Buyers of Japanese industrial goods from Boeing Co. to Airbus SE were once again scrambling to confirm whether safety had been compromised, after Mitsubishi Materials said three of its units had faked data on products that may have been delivered to more than 250 customers.

Mitsubishi Cable Industries Ltd. falsified data on rubber seals, while Mitsubishi Shindoh Co. misreported the strength of brass strips for auto parts, according to a statement Thursday. The products may have been shipped to 229 Mitsubishi Cable clients and 29 customers of Mitsubishi Shindoh.

Rubber products made by Mitsubishi Cable that did not meet the specification requirements of the Self-Defense Forces were used in some of the engines of their aircraft and vessels, officials at a government agency responsible for development and procurement of defense equipment have said. At Mitsubishi Cable, specification data on its O-ring sealing products were altered to match the requirements specified by client companies.

A third unit, Mitsubishi Aluminum Co. Ltd., also supplied non-conforming products, although it has already confirmed with customers that they are safe, the company said, adding that its investigation has not so far uncovered any cases that raise the possibility of legal violations or safety issues.

The revelation is the latest in a series of scandals to dent the image of Japanese manufacturers, and closely resembles recent admissions by Kobe Steel that it falsified data on the strength and durability of its products. In the auto sector Nissan Motor Co. has said it conducted vehicle inspections that didn’t comply with regulations for almost four decades, while Subaru Corp. allowed uncertified workers to make final safety inspections on vehicles before they were shipped.

And in one of the best known cases, air bag manufacturer Takata Corp. filed for bankruptcy earlier this year due to faulty products.

Mitsubishi Materials closed 8.1 percent lower Friday, wiping almost $400 million from its market value. Its stock had hit a two-year high earlier in the month, buoyed by stronger global metals prices. While the units affected are relatively small, the company said it can’t yet quantify the impact on its earnings.

Mitsubishi Materials President Akira Takeuchi told a briefing in Tokyo on Friday that the company didn’t disclose the problem when it reported earnings earlier this month because it wanted to find all of the customers affected. Takeuchi also said he won’t quit due to the misconduct.

“My duty is to instruct and supervise the investigation of the causes, and to take preventive measures swiftly,” he said.

Takeuchi also said the company is carrying out a probe into all of its operations, including practices at its subsidiaries.

Mitsubishi Cable and Mitsubishi Shindoh said Thursday they have each set up an investigative committee whose members include external lawyers to conduct a detailed probe and compile preventive measures.

Mitsubishi Materials expects the results of its investigation to be released by the end of the year.

At a briefing Friday, trade minister Hiroshige Seko called the matter “extremely regrettable.” He said the ministry has asked related departments to investigate its causes and is seeking an explanation from Mitsubishi Cable on why it took so long to report the problem. He added that he considers it a matter for the companies and not an industry-wide issue.

According to the Thursday statement by Mitsubishi Materials, Mitsubishi Cable uncovered the misconduct in February and stopped shipping non-conforming products on Oct. 23 before the company told its parent firm two days later. Mitsubishi Shindoh found out about its own problem in October and stopped shipments on Oct. 18, alerting Mitsubishi Materials the following day.

Mitsubishi Materials reported on the misconduct, with details of the products and customers affected, to the transport ministry on Friday.

Kobe Steel’s crisis erupted in early October, collapsing its shares. Although 525 customers were affected, none has yet to report safety issues and no products have been recalled. That has allowed its stock to recover some of its losses. As of last week, shipments to 484 clients had been given the all-clear.

Kobe blamed lax controls and too much focus on profit for its shortcomings, including unrealistically high standards that exceeded clients’ expectations and encouraged staff to disregard quality guidelines for a decade or more. The company was forced to abandon its profit forecasts and has lost quality assurance certification — often demanded by customers as a condition of sale — at seven of its 20 plants.

Aircraft maker Airbus SE said in a statement it doesn’t directly procure any materials from the Mitsubishi Materials companies and is investigating whether any of its suppliers are affected. Boeing Co. said it is reviewing the matter.

“Even if Mitsubishi Shindoh and Mitsubishi Cable don’t make up a big portion of the company’s earnings, not just the short-term impact but the mid- and long-term impact on its orders is a cause of concern,” Keiju Kurosaka, senior analyst at Mitsubishi UFJ Morgan Stanley Securities, said in a note.

About a fifth of Mitsubishi Cable’s output of seals from April 2015 to September this year may not meet standards, according to the statement. The company’s seal product business makes up about 40 percent of its revenue. The problems identified at the Shindoh and Aluminum units are much more minor, accounting for less than 1 percent of their sales, according to the company.