December 28, 2017
To: AllCompany
Mitsubishi Materials Corporation
Representative
Akira Takeuchi, President(Securities Code: 5711 on the First Section of the Tokyo Stock Exchange)
Nobuyuki Suzuki, General Manager,Inquiries to:
Corporate Communications Dept., General
Affairs Dept.
(TEL: 03-5252-5206)

Progress on Addressing Non-Conforming Products at MMC Subsidiaries ③

Mitsubishi Materials Corporation (“MMC”) sincerely apologizes for the difficulties that we havecaused to all concerned parties, including our customers and shareholders, in connection with Mitsubishi
Cable Industries, Ltd.’s (“MCI”) and Mitsubishi Shindoh Co., Ltd.’s (“MSC”) delivery of products thatdeviated from customer or internal specifications (“Non-Conforming Products”) due to misconduct,including the rewriting of data. MCI and MSC are consolidated subsidiaries of MMC.
We would like to report today on the progress that has been made to date in addressing these issues.
In addition, we would like to report on the restructuring of the governance framework for quality
control within our group.
1.

Safety Confirmation
1) MCI
With respect to seal products, we were evaluating the safety of the Non-Conforming Products withthe cooperation of the 229 customers initially identified as of November 23 as potentially receiving
Non-Conforming Products during the two and a half year period from April 1, 2015 to September 30, 2017.
However, because we later learned that there may have been more customers who received Non-Conforming
Products than initially identified due to insufficient testing (“Partial Non-Testing”), we conducted a review to
identify any additional Non-Conforming Products and the customers that may have received such products,
which was completed on December 27.
Although we had previously identified 229 customers to which MCI may have shipped
Non-Conforming Products as of November 23, upon further review, the number was reduced to 204
customers. We initially identified approximately 230 customers to which MCI shipped Non-Conforming
Products due to Partial Non-Testing, but upon further review, we determined that the number is, in fact, 107
customers. Accounting for the overlap in customers to which MCI shipped Non-Conforming Products due

to misconduct and Partial Non-Testing, MCI has determined that it delivered Non-Conforming Products to a
total of 218 customers (the total number of Non-Conforming Products shipped was approximately 180
million and sales were approximately 4.2 billion yen, which constituted approximately 14% of total sales ofseal products for the applicable review period).
We have restarted notifying customers as well as evaluating the safety of the affected products withthe cooperation of customers.
We have completed our notification to all customers that received non-conforming rectangularmagnet wires (MCI Product Name: “MEXCEL”) and, with their cooperation, we are currently evaluating thesafety of those products.
As of December 27, 2017, MCI’s progress(Note) is set forth below.
ProductNumber ofA

BCDCustomers
Seal products

218

084174

MEXCEL

50320(Note) The above categories, reflecting the status of MCI’s progress in evaluating the safety of affected
products, are as follows:
A. The customer has completed its confirmation that there are no safety concerns.
B. The customer has determined that there are no immediate safety concerns, but is conducting
further review.
C. MCI has communicated to the customer its opinion that, from a technical perspective, there is ahigh probability that the affected products can be assumed to be safe.
D. MCI has provided notification that Non-Conforming Products were delivered to the customer.
2) MSCOn December 20, 2017, after receiving a new report of suspected rewriting of data, we conducted areview of copper-strip products shipped from the Wakamatsu Plant during the one-year period of October 18,
2016 through October 17, 2017.

As a result of the review, we discovered that two customers received

certain products (totaling 71 tons and sales of 74 million yen, which constituted approximately 0.14% of theWakamatsu Plant’s total sales for the applicable review period) where the customer’s specification was set
narrower than MSC’s internal specifications and for which data relating to the composition of ingredientswere rewritten. We have already notified these customers and, with their cooperation, are evaluating thesafety of the products.

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As of December 27, 2017, MSC’s progress in evaluating the safety of the affected products,
including the products which we have previously reported, is set forth below.
ProductNumber ofA

BCD

72003Customers
Brass-strip and30

copper-strip products(Note 1) The above categories are the same as in the MCI table above at 1), with the exception that “MCI”
should be replaced with “MSC” in categories C and D.
(Note 2) We have included the two customers identified above that received Non-Conforming Products, oneof which overlapped with the previously identified customers. Therefore, the number of totalcustomers has increased by one since our prior press releases.
2.

Restructuring of the Governance Framework for Quality Control in Our GroupIn light of the recent quality issues, we have formulated measures to restructure our group’s

governance framework with respect to quality control. An outline is set forth below.
We will consider these specific measures promptly and implement them. The Special Investigation
Committee established by MMC has also expressed the opinion that these restructuring measures areappropriate.
In addition to considering quality control, we are also considering our group’s governanceframework, which entails considering how to “promote communication within the group,” “improve theescalation of issues within the group,” “foster senior manager candidates” and other items.
1)

Implementation of a Front Loading System for Receipt of Orders

We will aim to further expand implementing on a group-wide basis a process (a Front Loading
System) for making decisions on specifications and accepting orders at the time such orders are made after
having the various departments within the business, including development and design, manufacturing,inspections and sales, consider whether the order can be accepted, taking into account manufacturing
capability.
The primary purpose of the Front Loading System is to prevent accepting difficult orders that exceed
the company’s manufacturing capabilities. By further implementing this process, the following measures
will also be necessary:3 Promoting communications among the departments;
 Understanding the imbalances of capabilities among the departments and resolving such
imbalances; and Improving imbalances in authority among the departments.
The following are examples of specific actions that we will take to promote this initiative andincrease its effectiveness on an on-going basis:
 Regularly review production capabilities (including processes, inspections, shipping and othercapabilities); Based on the results of , develop appropriate maintenance plans and upgrade and install new
facilities and equipment; and Assign the appropriate personnel and provide training to resolve insufficiencies in employees’skill sets.
2)

Strengthening the Framework and Authority of the Quality Control Department

With the Technology Division’s Quality Control Department taking the lead, we will establish aframework aimed at improving quality control for our entire group and will restructure the required quality
control function for each business and product. In order for our group to conduct quality control in a
unified and consistent manner, we are considering the following measures:
 Redefining the allocation of responsibility for quality control functions within each businessand reflecting those changes in internal rules and regulations; Based on the above-mentioned allocation of responsibility, making organizational changes
among the corporate departments, companies, business establishments and subsidiaries, asnecessary; Granting authority to the quality control departments of each business so that they can conduct
appropriate inspections and quality assurance reviews;
 Ensuring that the quality control departments are independent from the manufacturing
departments; and Establishing a system to train personnel to become experts in quality control, and actively
assigning potential candidates for senior management from each company and department to
the quality control departments.
3)

Expansion of Quality Training

We will aim to have our group employees at all levels (from the manufacturing line to management)
and all areas (including manufacturing, inspection and sales) understand the importance of quality and what4must be done to maintain and enhance quality.

We will conduct training sessions on quality awareness,

including complying with customer contracts, the importance of providing quality products to our customers,
the need to structure the manufacturing process so as to promote quality, pride as a manufacturing company
and fastidiousness about quality (we will use the current issues as examples in these trainings).
Additionally, in order to conduct quality training throughout our entire group, MMC will formulate
guidelines on the training that should be conducted for each employee level and incorporate these guidelines
into the training programs conducted for each employee level at all group companies. In doing so, we will
have consistency within our group and establish a practical training system corresponding to each groupcompany’s business.
4)

Promoting Automated Inspection Equipment

For all inspection data, from when it is obtained during the manufacturing process through the final
inspections, by promoting the initiatives set forth below, we will aim to establish a system that will prevent
misconduct, including the rewriting of data, and will establish a system that allows for more accurate andprompt confirmation that inspection data is consistent with customer specifications by:
 Automating acquisition of inspection data; Uploading inspection data into manufacturing control systems; and Confirming that the inspection data is consistent with the applicable specifications.
These initiatives are expected to take time and will be costly to review and develop. To implement
these initiatives, MMC will be required to confirm the feasibility both of automating the acquisition ofinspection data from each testing device and of linking order-receiving systems with production systems sothat customer specifications can be uploaded into the manufacturing control systems.

We will begin

implementing certain action items, on a group-wide basis, relating to these initiatives where it is feasible todo so. We will also allocate the necessary budget to implement the initiatives.
5)

Enhancement of Quality Audits

With the Technology Division’s Quality Control Department and the General Administration
Division’s Internal Audit Department taking the lead, we aim to establish more robust quality audits byconsidering and executing the measures set forth below:
 Improving the independence of our group’s internal audit departments and strengthening theirauthority;
 Increasing internal audit staff and increasing the frequency of quality audits;
 Training personnel to become experts in quality audits;5 Applying audit methods for the prevention of misconduct; Enhancing coordination among MMC’s Internal Audit Department and the internal audit
departments of our affiliates; and Improving internal audit operations with the use of IT.
6)

Engagement of Outside Consultant

In order to receive a third-party perspective on quality control, we will engage an outside consultant
on an on-going basis specializing in quality control matters. The outside consultant will regularly visit
business locations of MMC and its subsidiaries, and will provide guidance and advice on our group’s quality
control and quality assurance operations.

We will avoid our group’s quality control operations frombecoming complacent and establish effective quality control operations.
3.

Outlook on Financial Results
The impact of this matter on MMC’s financial results is currently unknown. We plan to make aseparate announcement when the extent of the impact is known.
END
Direct any questions to:
Corporate Communications Dept., General Affairs Department, Mitsubishi Materials Corporation
TEL: 03-5252-5206
Corporate Administration & Personnel Section, Administrative Division, Mitsubishi Cable Industries, Ltd.
TEL: 03-3216-1551
Corporate Administration & Personnel Division, Mitsubishi Shindoh Co., Ltd.
TEL: 03-6629-5850

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