March 16, 2018 / 7:35 AM / 2 years ago

New head of scandal-hit Kobe Steel may seek mergers for some business units

(Reuters) - Kobe Steel’s new president on Friday said he may seek mergers or alliances outside the company for one or more of its business divisions, as he battles to repair damage from a data fraud scandal that roiled Japanese industry.

Mitsugu Yamaguchi faces a difficult challenge to rebuild credibility at the 112-year-old steelmaker, which sent shockwaves through global supply chains after revealing widespread tampering of specifications on products used in planes, trains and automobiles.

While no safety issues have been identified and the company’s shares have recovered much of their sharp losses from the early days of the scandal, Kobe Steel (5406.T) faces a U.S. Department of Justice investigation that may yet prove costly.

Consumers in the United States and Canada have also filed lawsuits against Japan’s third-largest steelmaker.

Kobe Steel has lost certificates of industrial quality that may make it harder to sell to certain customers.

“I will fully carry out my responsibilities to prevent any recurrences and regain trust,” Yamaguchi, 60, said at a press conference.

He said the company was unlikely to seek a full merger with a rival, but that individual businesses could be combined with others.

Yamaguchi replaces Hiroya Kawasaki as president and chief executive officer on April 1 after the long-serving head of the company stepped down to take responsibility for the fraud that the company admitted had been going on for nearly five decades. Kawasaki remains a director of the company.

Yamaguchi heralds from Kobe Steel’s machinery division, unlike many of his predecessors who had come from the company’s mainstay steel business or its general affairs operations.

Kobe Steel's incoming CEO Mitsugu Yamaguchi bows as he attends a news conference in Tokyo, Japan March 16, 2018. REUTERS/Toru Hanai

Kobe Steel last week released results from a four-month-long investigation by an external committee and said it had found new cases of impropriety, increasing the total number of affected clients to 605, including 222 overseas.

The company’s data tampering came mostly from its aluminium and copper division, but some cheating cases were found at the steel division.

The Kobe Steel case, one of the country’s biggest industrial scandals in recent memory, set off a rash of malfeasance revelations by other Japanese heavyweights, hitting the country’s reputation for manufacturing excellence.

Reporting by Osamu Tsukimori; Writing by Aaron Sheldrick; Editing by Christian Schmollinger and Joseph Radford

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