Kobe Steel, Nissan scandals tarnish image of Japanese Inc

TOKYO Embarrassing scandals at Kobe Steel and Nissan have tarnished Japan Inc's reputation for quality, as once-mighty industrial world-beaters battle fierce global competition and shrinking profit margins.

Once again, the image of a corporate boss bowing deeply in apology before the cameras has been splashed across Japan's newspapers and sparked a fresh bout of national soul-searching.

Kobe Steel's chief admitted that his firm had falsified quality data in products shipped to about 500 clients, including carmaker Toyota and aircraft manufacturers.

The news that the affected parts were also used in Japan's Shinkansen bullet trains deepened the humiliation for the "Made in Japan" brand, once a byword for quality.

The revelation wiped US$1.8 billion (S$2.43 billion) off Kobe Steel's shares over the past week - a drop of more than 40 per cent - as the scandal widened to other products.

The Kobe Steel news came just days after Nissan recalled more than a million vehicles in Japan after admitting that staff without proper authorisation conducted final inspections before shipping them to dealers.

"Once the Japanese way of manufacturing won the praise of the world. But now jobs are being outsourced and factories are sent overseas," said Kansai University Professor Emeritus Koji Morioka.

Global competition and an unending drive to cut costs have resulted in a situation in developed countries, such as Japan, where workers keep quiet to protect themselves even if they see wrongdoing, he added.

The admissions came as the global industry landscape is going through sweeping transformations, experts said.

Costly workers in mature economies are directly pitted against cheap factory staff in emerging markets in a competition for jobs.

Meanwhile, newcomers are taking market share away from traditional corporate giants.

In the steel-making sector, for example, Indian and Chinese giants have steadily expanded, pressuring their Japanese rivals.

And the Japanese auto manufacturing behemoths have expanded overseas production, rather than exporting vehicles.

The Kobe Steel and Nissan scandals are the latest in a string of negative headlines for the Japanese industry, which used to be the envy of the world.

Airbag-maker Takata went bankrupt this year after spending years dealing with defective products that were linked to 16 deaths, while Mitsubishi Motors last year admitted it falsified mileage tests for years.

Mr Sadayuki Sakakibara, chairman of the powerful Keidanren business lobby, said "global confidence and trust in Japanese manufacturing were based on unrivalled quality that overwhelmed other countries".

"These acts were so serious that it could have an impact" on trust in Japanese manufacturing, he said.- AFP