According to CCTV Finance, an external investigation report released on September 4 by Japanese motor manufacturing giant Nidec Corporation revealed widespread misconduct across the company.
The scandal first came to light in May. An investigative committee identified 844 cases of misconduct across 12 Nidec business units and subsidiaries.
Around 95% of the cases involved changes to manufacturing processes, product designs, materials, and other specifications without prior customer approval. Other violations included tampering with or fabricating inspection data and shipping non-conforming products as though they had passed quality requirements.
The revelations are particularly significant because Nidec had already disclosed another compliance issue in June.
While preparing its annual report for the fiscal year ended March 2025, the company discovered that one of its overseas subsidiaries had incorrectly declared the country of origin of certain products for several consecutive years, resulting in unpaid customs duties.
Nidec subsequently launched an external investigation and announced that its annual report, originally due by the end of June, would be delayed until no later than September 26.
However, instead of finally receiving the delayed annual report, investors were confronted with yet another announcement — this time involving potential improper accounting practices.
After the market closed on Wednesday, Nidec announced that it would establish a third-party investigation committee after an inquiry into accounting irregularities at another overseas subsidiary uncovered indications that the problem could be considerably broader than initially believed.
The issue began when Nidec’s Audit and Supervisory Committee received a report from an overseas subsidiary regarding approximately ¥200 million in potentially improper accounting treatment.
Under the committee’s supervision, Nidec brought in external lawyers, accountants, and other specialists to conduct an internal investigation.
What emerged from that investigation raised even greater concerns.
Nidec said investigators had uncovered several suspicious documents suggesting that improper accounting practices may not have been limited to the overseas subsidiary originally under investigation.
The materials indicated that Nidec itself and other group companies may also have exercised arbitrary discretion over the timing of asset impairment charges, potentially with the knowledge or direct involvement of members of management.
Given the seriousness and potential scope of the allegations, Nidec concluded that an internally led investigation would have limitations.
The company therefore decided to establish an independent third-party committee in accordance with guidelines issued by the Japan Federation of Bar Associations for investigations into corporate misconduct.
When questioned on Thursday, Nidec declined to identify which executives or managers might be involved, saying the investigation was still ongoing.
Morgan Stanley analyst Shoji Sato said in a recent report that many important questions remain unanswered.
These include how far back the external investigation will go, the potential scale of the accounting irregularities, and when the committee will be able to complete its investigation and publish its findings.
The latest developments have also raised concerns among investors over whether Nidec will be able to meet its end-of-September deadline for filing its annual report.
The Scandal Comes at a Critical Time for Nidec
The accounting issues are particularly significant because they have emerged while Nidec is undergoing a major corporate transformation.
As one of Japan’s most aggressive acquirers, Nidec says it has completed or participated in 75 mergers and acquisitions.
Under founder Shigenobu Nagamori, the company pursued an aggressive expansion strategy for decades, building a highly diversified business portfolio spanning everything from server cooling fans and automotive transmissions to elevators, electric-vehicle charging systems, and wind turbines.
Now in his 80s, Nagamori stepped down as CEO last year and handed responsibility for turning the company around to Mitsuya Kishida.
Nidec subsequently announced a major restructuring program that includes workforce reductions and a significant overhaul of its global manufacturing footprint.
Under the plan, the company aims to cut its roughly 250 production sites by half by March 2028, while shifting more resources toward fast-growing sectors such as data centers.
Nidec plans to focus increasingly on higher-margin businesses, including machine tools, power generation, and energy storage, while also expanding its presence in liquid-cooling systems for artificial intelligence data centers.
The challenge now is that Nidec is attempting to execute this strategic transformation while simultaneously dealing with serious questions surrounding quality control, accounting practices, corporate governance, and management oversight.
