Get to the bottom of product data falsification

A criminal investigation has been launched into Kobe Steel Ltd.’s product data fabrication scandal — one of a series of similar problems that surfaced at major Japanese companies and shook international trust in the nation’s manufacturing industry. The joint probe by the special investigation squad of the Tokyo District Public Prosecutor’s Office and the Metropolitan Police Department should aim to rebuild that trust by exposing how and why falsification of product inspection data has been allowed to go on for decades. The correct lessons must be learned to prevent a recurrence of the problem.

In the scandal that surfaced last October, inspection data on Kobe Steel’s aluminum and copper products at 23 domestic and overseas plants was found to have been altered to make it look like the products met customer specifications, such as strength, when in fact they did not — or sometimes the data was fabricated without inspections taking place. The data falsification reportedly dated back at least to the 1970s at an aluminum product plant in Tochigi Prefecture.

Products with falsified data had been shipped to more than 600 of Kobe Steel’s domestic and overseas customers and were used in products ranging from automobiles to passenger jets and bullet trains — whose performance directly affects the safety of consumers. Some of the products were used in nuclear power plants; Kansai Electric Power Co. delayed the restart of its Oi plant in Fukui Prefecture by two months because of the data falsification problem.

Because falsely certified products were shipped to major U.S. aircraft maker Boeing Co., the U.S. Justice Department launched its own probe, calling on the U.S. unit of Kobe Steel to submit relevant documents. Damages suits have been filed by consumers in the United States and Canada. The scandal dented the firm’s consolidated earnings in the fiscal year to last March by ¥12 billion. Kobe Steel says it has confirmed the safety of products shipped to most of its customers, but the sheer fact that the data falsification had been going on unchecked for so long was enough to tarnish the company’s global brand.

In a report compiled by a third-party team of investigators and released in March, Kobe Steel said about 40 people at the firm were involved in the product data falsifications, including several executives who had been aware of the wrongdoing and two others who took part in data falsification before they were promoted to executive positions. The falsifications took place as each of the firm’s divisions, following its top management’s profit-focused policy, took business orders without sufficiently examining their production capacity, the company said, adding that the data falsification went on “based on the wrong idea” that it’s all right to ship products that fell short of customer specifications “up to a certain degree.”

Kobe Steel has replaced Hiroya Kawasaki, its chairman and president, and said it is taking steps to prevent the recurrence of the problem by tapping outside directors to occupy more than a third of the seats on its board and installing directors in charge of compliance and product quality. It has not disclosed the full text of the third-party investigation, however, citing lawsuits filed overseas over the case.

Details on how exactly the company’s executives were involved in or learned of the wrongdoing have not been made known. Since the practice of data falsification is said to have been passed on when the people in charge at the plants in question were rotated, the question remains whether the wrongdoing had gone on in an organized manner instead of being led by specific individuals at the plants. The investigation by police and prosecutors should shed more light on what exactly was behind the product data falsification.

The falsification of product inspection data has surfaced at other blue-chip Japanese manufacturers, including the subsidiaries of Toray Industries Inc. and Mitsubishi Materials Corp. It is believed that such falsification took place as plant workers were under pressure due to high specifications and tight delivery deadlines.

Last December, a unit of Toyo Tire & Rubber Co. was fined ¥10 million for shipping substandard earthquake shock absorbing rubber equipment for use in construction of government buildings and condominiums by falsifying performance data of the devices in question. Nissan Motor Co. and Subaru Co. have meanwhile admitted that unauthorized workers carried out vehicle inspections at their plants.

All these industrial scandals have damaged the Japanese manufacturers’ reputation for the quality of their products. Corporate Japan’s tarnished image can only be restored by thorough efforts to identify what went wrong and to make sure that it doesn’t happen again.