IHI subsidiary falsifies measurement data on marine engines – stock price plummets – Bloomberg

IHI announced that it has been discovered that its subsidiary, IHI Power Co., Ltd., had made inappropriate changes to test run records for marine engines and land-based engines.

According to the announcement, a review of the available data from 2003 revealed that 4,215 of the 4,881 marine engines shipped and 146 of the 656 land engines shipped had been revised.

The company is reconfirming whether or not the engine violates laws and regulations related to the engine, using actual measurements. In addition, a special investigation committee will be established consisting mainly of outside experts, including lawyers, to investigate the cause and formulate measures to prevent recurrence.

At a press conference held in the evening, IHI Vice President Hideo Morita said that while it is generally important for inspections to be independent from manufacturing, the fact that measurements were being taken in the manufacturing department was “a structural error.” and analyzed the cause of the falsification.

When the company interviewed people involved, they said they had made the changes to make the fuel efficiency data look better and to smooth out variations in the data. According to IHI Managing Director Koji Takeda, there has been evidence that inappropriate acts have been occurring at factories in Niigata Prefecture since the late 1980s, and it is unclear whether the falsification problem will remain within the current scope.

Bloomberg Intelligence analyst Takeshi Kitaura said in a report that although the engine business, including marine engines, accounts for a small percentage of the sales plan for the fiscal year ending March 2024, it appears that concerns about tampering will spread to other segments. He pointed out that the financial impact could be even greater.

NHK had earlier reported on the same content based on interviews with people involved. In response to the report, the company’s stock saw an increase in sell orders in afternoon trading, and at one point fell 9.6% from the previous day to 3,474 yen, the highest intraday decline since September 12, 2023. The closing price was 3,625 yen, down 5.7%.

The Ministry of Land, Infrastructure, Transport and Tourism said it had received a report from IHI regarding inappropriate conduct, and ordered it to investigate the entire situation, including confirmation of inappropriate conduct that occurred before 2003, and to formulate measures to prevent recurrence. Both companies will be required to report on the matters they discovered and took measures by the end of May.

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