(May 13): Nidec Corp shares fell after the company identified more cases of improper conduct, this time involving the quality control of motors and other products.
The issues included changes made to materials, processes and designs without approval, Nidec, the world’s largest manufacturer of precision motors, said in a statement on Wednesday. Shares fell as much as 18% in Tokyo.
What began as a drawn-out scandal caused by a series of bookkeeping errors has now spread to concerns over the integrity of Nidec’s manufacturing. As the situation worsens, the company said it will be conducting a comprehensive quality inspection and will outline its response to the latest findings later on Wednesday.
“If the quality tampering allegations prove true, Nidec could face additional cost increases and revenue declines,” Citigroup Inc analyst Takayuki Naito wrote in a note. “With the June annual shareholders’ meeting and securities report submission approaching, the discovery of additional investigation issues is likely to weigh negatively on the shares.”
Nidec’s suspected tampering with quality control involves more than a thousand cases, Nikkei reported earlier. Its stock has been removed from the Nikkei 225 and Topix indexes, and the Tokyo Stock Exchange has said it may delist the company if it can’t show an improvement in its internal management.
Nidec has been embroiled in turmoil since numerous cases of improper bookkeeping surfaced last year at subsidiaries in Italy, Switzerland and China as well as within its core automotive electric-motor inverter business.
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Furthermore, Nidec had, among other violations reported by third-party investigators, spent years inflating values of raw materials and inventories, incorrectly declaring customs values, presenting government grants as revenue in financial statements and counting labour costs as fixed assets to defer expenses.
The ongoing scandal saw the company brace for ¥250 billion in impairment charges and forced founder Shigenobu Nagamori to resign.
In March, Oasis Management Co revealed a 6.74% stake in Nidec and called for sweeping governance reforms.
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Nidec risks a further loss of market share and a delay to its earnings recovery, wrote Bloomberg Intelligence senior industry analyst Masahiro Wakasugi in a report. “Depending on the findings, one-off losses could arise, adding further strain as the company seeks to recover.”
Much of the turmoil at Nidec has been attributed to the leadership of Nagamori, whose unrelenting expectations were said to have created an unsustainable culture. As financial pressure built, units attempted to cover losses by reporting higher revenue but in turn that led to even greater strain.
Nagamori gave up his position as chairman emeritus in February. He had left the board in December.
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