Business / Corporate

Kobe Steel CEO steps down over data fabrication scandal

by Shusuke Murai

Staff Writer

A festering data-fabrication scandal has cost Kobe Steel Ltd.’s chief executive his post, as well as the jobs of other top executives, the firm announced Tuesday as it seeks to take responsibility for the brouhaha that has erupted over the quality of its products and dented the nation’s once vaunted reputation for excellence.

Hiroya Kawasaki, the firm’s 63-year-old CEO, will step down on April 1, a decision approved at a board meeting Monday. Executive Vice President Akira Kaneko, 63, who is in charge of its aluminum and copper business, will also resign. Both executives will remain as board members until late June, after its annual shareholders meeting.

“I thought it’s best for the company to proceed with reforms under new managers with speed, so that we can show as many people as possible that the company has changed,” Kawasaki told a news conference Tuesday. “We once again deeply apologize that our misconduct has caused enormous inconvenience for our customers, clients and stakeholders.”

The company has not yet decided who will take over the top position. Kawasaki said a new CEO will be announced following a decision by its board members.

The resignation came after a release of a final report compiled by a third-party team of investigators. The report cited an emphasis on profits, excessive pressures to meet strict deadlines, waning compliance among employees and poor quality control procedures as the root causes behind the data manipulation.

The third-party investigation also revealed that an additional 163 companies were affected by the data-fabrication scandal, Kobe Steel said Tuesday. The total number of clients affected is now 605, it said.

Among the affected companies are Toyota Motor Corp. and Mitsubishi Aircraft Corp., a subsidiary of Mitsubishi Heavy Industries Ltd.

As a part of preventive measures, the company said it will increase the number of outside board members to account for at least one-third of the total so as to secure more robust management transparency. The company also said it will drive forward a campaign that promotes better communication between managers and employees.

The scandal came to light last October when the nation’s third-biggest steel-maker announced it fabricated inspection data for some of its aluminum and copper products shipped to a number of companies, including automakers and train operators.

The scandal widened later as more data falsifications surfaced concerning other products used in a wide variety of manufactured goods, including rockets and shinkansen parts.

The 112-year-old company said the falsifications had been continually committed since as early as the 1970s at its factories. It said employees had altered inspection data, including information concerning the strength of its products, to make them appear as if they had met customer specifications.