Japan Steel Works : Business Results for the First Half of the Fiscal Year 2022 (Ended March 31, 2023)

November 17, 2022

Toshio Matsuo

Representative Director & President

The Japan Steel Works, Ltd.

© The Japan Steel Works, Ltd. All Rights Reserved.

Misconduct in Quality Inspections at Japan Steel Works M&E Inc.

• Outline of the Results of Investigation Performed by the Special Investigating Committee
• No misconduct in quality inspections was discovered at the Hiroshima Plant, Yokohama Plant and Meiki Plant, which are involved in the Industrial Machinery Products Business.
• The committee confirmed that the misconduct in quality inspections at Japan Steel Works M&E Inc. extended to the entire Material Business.
• While there were no cases of nonconformance (products not meeting the acceptance criteria required by customers) in nuclear power products, the committee confirmed deviation from procedures and specifications and other misconduct.
• The following factors are identified as causes:
• • Dysfunctioning of the management system.
  • Deterioration in the level of compliance awareness.
  • Shortage of human resources, etc.
• To prevent recurrence, the following measures are proposed:
• • Review the management system.
  • Foster compliance awareness.
  • Make efforts to seek understanding from customers.
  • Enhance human resources.
  • Develop an organizational culture that encourages open exchange of opinions.
  • Digitize inspection records, etc.

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Misconduct in Quality Inspections at Japan Steel Works M&E Inc.;

Our Initiatives to Prevent Recurrence and Reform Our Organizational Culture

• Initiatives to Prevent Recurrence and Reform Our Organizational Culture

1. Cause analysis

• Concentration of power in the Product Engineering Department and low awareness of compliance with regard to process quality.
• Overconfidence in experience and achievements, pressures of request from customers, and hesitation to communicate with customers.
• Paper‐based and manual inspection process and chronic shortage in human resources.

1. Analysis on background

• Manufacturing with the Product Engineering Department serving as the top, control tower.
• History of creating subsidiaries through functional spin‐offs and invisible barriers among employees.

Based on the above analysis and consideration, measures to prevent recurrence have been formulated and will be implemented.

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Misconduct in Quality Inspections at Japan Steel Works M&E Inc.;

Our Initiatives to Prevent Recurrence and Reform Our Organizational Culture

• Initiatives to Prevent Recurrence and Reform Our Organizational Culture

1. Measures to prevent recurrence
2. 1. Japan Steel Works M&E Inc.

• Rectify the concentration of power in the Product Engineering Department and strengthen the independence of quality assurance functions.
• • The quality assurance divisions will be placed under the direct control of the President of Japan Steel Works M&E Inc. effective June 1.
• Reform our workplace culture.
• Strengthen education on quality control.
• Digitize the inspection process.
• Allocate appropriate managerial resources to quality control.
• Improve communication with customers.
• Revise standards for storing quality‐related documents and data.

2) The Company's measures to prevent recurrence

• • Develop a company‐wide quality assurance system
  • • Newly establish the Quality Management Office at the Head Office as of September 16.
  • Improve awareness of quality compliance.
  • Strengthen governance and internal control.
• We will sincerely consult with customers to proceed with our response.
• We take the recommendations of the Special Investigation Committee seriously and will resolutely strive to prevent recurrence.
• We will strive so that we can earn your trust again.

© The Japan Steel Works, Ltd. All Rights Reserved.	3

November 17, 2022

Toshio Matsuo

Representative Director & President

The Japan Steel Works, Ltd.

© The Japan Steel Works, Ltd. All Rights Reserved.