Japan Inc scandals widen as Toray admits cheating

Japan’s Toray Industries Inc on Tuesday revealed 149 cases of quality data falsification at a materials-making subsidiary spanning eight years, in the latest quality-assurance scandal to hit a Japanese manufacturer.

The world’s largest maker of carbon fiber composite materials said the cheating involved products including tire-strengthening cords sold to 13 clients by Toray Hybrid Cord Inc. A broader probe into possible wrongdoing across the group was ongoing.

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Toray did not name any affected customers but ruled out U.S. aircraft maker Boeing Co (BA.N), for which the Japanese company is a major supplier of carbon fiber used in passenger jets, and Uniqlo parent Fast Retailing Co Ltd (9983.T), which uses its products in its best-selling Heattech clothing line.

Japanese companies are facing growing pressure to disclose quality-assurance failings after widespread data falsification was uncovered at Kobe Steel Ltd.

Toray said its subsidiary became aware of its problems in July last year, and the group learnt of them in October. It only decided to publicly disclose the cheating after rumors appeared earlier this month in an anonymous online post.

“There were no legal violations or safety problems; this was between us and our customers, and so there was no need to disclose it,” Toray President Akihiro Nikkaku told a news conference.

The internet post forced the company to “give a proper explanation before rumors spread”, Nikkaku said, adding that even if similar cases were found in the future the company would not be required to make them public.

The comments are likely to fuel concerns about Japanese manufacturers’ governance and their commitment to stamp out cheating.

Last week Mitsubishi Materials Corp (5711.T) admitted that it may have sent products with falsified data to scores of customers, and possibly continued to ship these products for months after the wrongdoing was discovered.

Automakers Nissan Motor Co Ltd (7201.T) and Subaru Corp have also been hit by compliance scandals.

Toray Industries’ logo is pictured at its headquarters in Tokyo, Japan, November 28, 2017. REUTERS/Issei Kato

The admissions threaten to damage trust in Japan’s manufacturing industry at a time of growing competition from its Asian neighbors such as China and South Korea.

Toray’s shares plunged more than 8 percent following the announcement and closed down 5.3 percent in a flat broader market.

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