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Toyo Tire's problems stem from its corporate culture

TOKYO -- Takuji Yamamoto, president of Toyo Tire & Rubber, as well as two other top executives will resign to take responsibility for falsifying data on the company's earthquake shock absorbers.

Toyo Tire & Rubber President Takuji Yamamoto, right, announces the resignation of himself and other top executives at a press conference on June 23,2015.

     Top management kept quiet about shipping absorbers that did not meet government standards for nearly six months after recognizing the fact.

     The decision to keep the problem hushed-up stemmed from a deep-rooted culture described as an exclusive "country club."

Fabrication of data

At an in-house meeting that Yamamoto attended in October, participants discussed a proposal to make a list of employees who they thought might become whistleblowers.

     At the time, Toyo Tire was trying to make as many of its earthquake shock absorbers as possible appear to be government-compliant. The proposal was aimed at dissuading possible whistleblowers from exposing information that could result in product recalls.

     Although the proposal was turned down, the fact that it was even deliberated reflects the company's country club culture.

     Toyo Tire has been bitterly criticized for concealing that it falsified data on its earthquake shock absorbers. But the graver problem is that it falsified data in the first place and even had a process to do so.

     Testimony from various people concerned with the matter suggests that multiple departments in the company were involved in the fabrication.

     With rival Bridgestone successively releasing new earthquake shock absorbers, Toyo Tire's marketing section was urging the development department to come up with new products that could clear government standards. Some developers were told by their superiors to prepare documents for submission to the government, even if they had to use fake test results.

     When the development department asked the manufacturing department to remake products, the request was rejected on the grounds that it came too close to the date of delivery. The manufacturing department also maintained that it was not to blame for failing to meet government standards and told the development department to add data to the necessary documents.

     Even the quality-assurance section prepared documents explaining how Toyo Tire's shock absorbers performed -- before receiving any data. When the actual analytical data was submitted, the section rewrote the analysis to match what it had already put out.

     It was eight years ago when Toyo Tire first noticed a problem. The company conducted an emergency examination on the quality of all of its products following a fabrication fiasco in 2007 regarding Toyo Tire's heat-insulation panels. The tests showed that the company's internal standards for earthquake shock absorbers wildly deviated from government requirements.

     But Toyo Tire did not disclose the finding; it even declared that all of its products were safe.

     At a press conference on June 23 to announce that top executives would resign, Yamamoto said, "We had a country-clublike culture."

     Yamamoto also announced a set of measures to prevent a recurrence, including emergency quality examinations and the establishment of quality and compliance inspection panels.

     "We will address the problem with a strong resolve that we will be reborn from scratch," Yamamoto said, stressing that Toyo Tire will never commit the same sin.

     But the company remains under the public microscope.

     In fact, the countermeasures announced by Toyo Tire are the same as those adopted in the wake of the 2007 insulation panel fiasco.

     Although the company increased the number of outside directors and auditors to six following the panel problem, it kept these directors in the dark about the earthquake shock absorber falsifications until February, just before the company went public with the information. Four months earlier, a meeting to discuss the issue was canceled the same day it was to take place.

     Toyo Tire "needs to resolve to carry through drastic reforms accompanied by fierce pain," said Hideaki Kobayashi, a lawyer who compiled an inspection report on the data falsification problem. "The survival of the company will be questioned if it commits [the same act] a third time."

     Twice now Toyo Tire executives have resigned to take responsibility for the company fabricating data. Unless a strong leader comes in who can replace the country-club atmosphere with a professional business culture, Toyo Tire will evade resurrection.

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