Business / Corporate

Toray president admits learning of subsidiary's product data manipulation 16 months ago

JIJI

Toray Industries Inc. President Akihiro Nikkaku was aware that product data was being manipulated at a subsidiary in August 2016, two months before he received a formal report on the misconduct, informed sources said.

Toray detected the problem that July, and Nikkaku was verbally informed of it the next month, the sources said, adding that he discussed the matter with auditors the following September.

The major textile maker announced the misconduct at Toray Hybrid Cord Inc. earlier this week, about 16 months after it surfaced.

Toray initially planned not to disclose the irregularities, but changed its mind after the misconduct was posted online.

“No client has reported safety problems,” Nikkaku told Tuesday’s news conference, referring to its tire cords, which are among the affected products. He insisted that the cords, which are used to strengthen tires, came up only 1 percent short of the client’s requirement that they be 10 times the level required to secure product safety.

The data falsification was conducted “because minor deviations were arbitrarily interpreted as not abnormal, given the nature of the products,” said Toray Hybrid Cord President Nobuhiro Suzuki.

The finding is dragging Toray into the data falsification scandal that has engulfed a number of major Japanese manufacturing names.

Toray’s attitude toward product safety and corporate governance has a lot in common with two of those names: Kobe Steel Ltd. and Mitsubishi Materials Corp.

These companies shipped products that did not meet the quality requirements of their clients without divulging the flaws, assuming that minor deviations would not cause safety problems.

This attitude of disregard for clients appears to be a common theme.

At Kobe Steel, “workers believed that there was no problem rewriting figures unless customers complained,” according to a report on its internal investigation released earlier this month.

The scandals also showed how slow their management teams were in responding to the irregularities.

For example, it took eight months before shipments of nonconforming products were halted by one of the Mitsubishi Materials subsidiaries involved in such misconduct. The group then spent another month disclosing the problem.

Toray took 16 months to make its subsidiary’s irregularities public. But online postings and a number of inquiries led Toray to announce it, Nikkaku said.

Toray and Mitsubishi Materials would not have disclosed their problems had the Kobe Steel data fabrication scandal not emerged, industry sources said.

At a news conference Wednesday, industry minister Hiroshige Seko expressed deep regret that the quality data falsification problem had spread to Toray.

“I hope other companies will also conduct internal checks and disclose any such misconduct as soon as possible if there is any,” he said.

Sadayuki Sakakibara, chairman of Keidanren (Japan Business Federation) and a Toray adviser, apologized on Wednesday over the scandal.

“I’m really sorry as Keidanren chairman and Toray senior adviser,” Sakakibara told reporters at the Finance Ministry. It was his first media apology since the scandal broke.

Sakakibara said he was “not aware” of the wrongdoing at the time, but added that he takes very seriously the fact that the problem happened when he was in Toray’s top posts.

Sakakibara called on members of Keidanren, Japan’s biggest business lobby, to thoroughly implement measures to strengthen corporate governance in light of the nation’s manufacturing scandals.

Sakakibara learned about the scandal at Toray from its executives just after it came to light Tuesday.