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Japan-Update

Kobe Steel to name machinery head as new president

Company avoids candidates from scandal-ridden mainstay steel business

TOKYO -- Kobe Steel plans to appoint the head of its machinery business, Mitsugu Yamaguchi,  as president to replace Hiroya Kawasaki, who is resigning after quality control failures resulted in subpar metals being provided to hundreds of clients, Nikkei has learned.

The company's leaders have often come from its mainstay iron and steel business, which generates just under 40% of its sales. It hopes to regain trust by tapping the head of a noncore segment that had little to do with the data falsification scandal. The move is expected to become official at a board of directors meeting to be held Friday.

Yamaguchi, 60, was named as executive vice president in charge of the machinery business last year. The segment is expected to book 170 billion yen ($1.6 billion) in sales for the fiscal year ending this month, about 10% of the company's total turnover.

The scandal has prompted Kobe Steel to eliminate the current chairman position, which has been held by a company insider, and appoint an independent director to lead the board in an effort to improve transparency. It will also consolidate seven segments headed by directors into just three -- materials, machinery and energy -- to limit the drawbacks from a vertical organization.

Mitsugu Yamaguchi currently leads the machinery business.

Problems with Kobe Steel's aluminum and copper materials were discovered in October, and an internal investigation showed data falsifications and cover-ups in the steel and machinery divisions as well. Overall, more than 500 companies received products that did not meet agreed-upon specifications.

Kobe Steel expects to report a net profit of 45 billion yen for the current year, bouncing back from a 23 billion yen net loss in fiscal 2016, with mainstay businesses like the iron and steel segment recording their first black ink in three years. The steelmaker has come under scrutiny by the U.S. Justice Department, however, leaving it vulnerable to future losses.

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