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Kobe steel tarnishes image of Japan Inc

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This file photo taken on shows Kobe Steel President Hiroya Kawasaki attending a press conference in Tokyo. AFP

TOKYO (AFP) – Embarrassing scandals at Kobe Steel and Nissan have tarnished the reputation of Japan Inc for quality, as once-mighty industrial world-beaters battle fierce global competition and shrinking profit margins.

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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 his firm had falsified quality data in products shipped to about 500 clients, including carmaker Toyota, aircraft manufacturers and defence contractors.

The news that the affected parts were also used in Japan’s “Shinkansen” bullet trains deepened the humiliation for the “Made in Japan” brand that was once a byword for quality.

The revelation wiped $1.8 billion off its share price over the past week – a drop of more than 40 percent – as the scandal deepened and widened to other products such as steel wires, a key company product.

The Kobe Steel news came just days after Nissan recalled more than one million vehicles in Japan after admitting that staff without proper authorisation conducted final vehicle 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. Things have changed,” said Koji Morioka, professor emeritus at Kansai University.

Intensifying global competition and an unending drive to cut costs have resulted in a situation in developed countries like Japan where workers keep quiet to protect themselves even if they see wrongdoing, added the expert.

“As globalisation continues, companies are expanding local production, and emerging economies are becoming ever more competitive,” Mr Morioka said.

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

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

Experienced workers with stable contracts are being replaced by temporary novices, while management demands higher productivity from all employees.

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

In the steelmaking sector, for example, Indian and Chinese giants have steadily expanded, adding pressure to their Japanese rivals.

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