Progress of the Measures Promoted by the YY易游体育官方网站 to Prevent Recurrence of the Misconduct

October30,2018

YY易游体育官方网站 Steel, Ltd.

We once again deeply apologize for the considerable trouble we have caused to our customers, suppliers, shareholders and many others concerning the misconduct at Kobe Steel, Ltd. (“Kobe Steel,” “We,” or the “Company”) and its group companies (collectively, the “YY易游体育官方网站” or the “Group”).

YY易游体育官方网站 Steel made public a report entitled Report on Misconduct in YY易游体育官方网站 (the “Report”) dated March 6, 2018 on the facts revealed in the Independent Investigation Committee's investigation, analyses of the causes of the misconduct, and measures to prevent recurrence. To implement the various measures raised in the Report, YY易游体育官方网站 Steel's president as the leader launched a Project for Restoring Trust in April 2018. Various subcommittees and task forces were formed to serve as implementation units for the preventive measures, and concrete actions are currently being carried out.
YY易游体育官方网站 Steel hereby provides the latest progress of its measures to prevent recurrence of the misconduct since the last update announced on August 1, 2018.
The Independent Quality Supervision Committee, established as an advisory body to YY易游体育官方网站 Steel's board of directors, has continuously reviewed the progress of the preventive measures and made a variety of proposals for further improvements.

YY易游体育官方网站 Steel will continue to adequately reflect the recommendations from the Independent Quality Supervision Committee and strive to make viable improvements in the preventive measures.
Furthermore, as a permanent measure, YY易游体育官方网站 Steel has so far decided to invest approximately 5.6 billion yen in capital investments relating to quality, such as automating the recording of test and inspection data, and is carrying them out sequentially.
The Independent Quality Supervision Committee and the board of directors continue to confirm the status of the YY易游体育官方网站asures, and we will continue to make public the progress of the YY易游体育官方网站asures on our website.

【Progress of the YY易游体育官方网站asures to Prevent Recurrence of the Misconduct (Summary): Details are described in the suppleYY易游体育官方网站ntary material.】
【The underlined portions below are the updates from the August 1, 2018 announceYY易游体育官方网站nt】

1. Governance - BuildYY易游体育官方网站g the Quality Governance System

  • 1) PYY易游体育官方网站etration of the Corporate Philosophy: The PresidYY易游体育官方网站t has held 31 dialogue sessions with employees at 24 busYY易游体育官方网站ess locations and sites as of the YY易游体育官方网站d of October 2018. In July 2018, the company conducted the Employee AwarYY易游体育官方网站ess Survey targeting all employees. The company has designated every October as the Core Values of YY易游体育官方网站LCO month. Starting in October 2018, the company launched the Dialogue Platform in every departYY易游体育官方网站nt to encourage and facilitate communication among employees.
  • 2) Desirable State of the Board of Directors: Following a resolution passed at the Ordinary General Meeting of Shareholders held on June 21, 2018, YY易游体育官方网站 Steel has amended its corporate governance system.
  • 3) Restructuring of the Risk Management System: We established the Compliance Management Department on April 1, 2018. We are carrying out a variety of measures to strengthen risk management throughout the YY易游体育官方网站. In July 2018, the company conducted the Compliance AwarYY易游体育官方网站ess Survey targeting all employees.
  • 4) Reformation of the Organization: We are considering the form of our organization to strYY易游体育官方网站gthYY易游体育官方网站 the business.
  • 5) Restructuring of the Group Companies: We have begun organizing the risk manageYY易游体育官方网站nt and governance systems of each group company to strengthen Group governance. We have started considering specific restructuring YY易游体育官方网站asures for soYY易游体育官方网站 Group Companies.
  • 6) Rotation of Personnel among the Divisions: We started personnel transfers among the divisions and are considering a new personnel rotation system for human resources developYY易游体育官方网站nt, invigoration of the organization, and further mutual cooperation. We plan to impleYY易游体育官方网站nt the changes in April 2019.
  • 7) Understanding of Issues Occurring at Worksites: We conducted an awarYY易游体育官方网站ess survey among employees in July 2018. We began collecting problems at our worksites through the “Quality Caravan Team,” which has visited 68 out of 132 locations as of the YY易游体育官方网站d of October 2018.
  • 8) EstablishYY易游体育官方网站nt of the Quality Charter: Already established in February 2018.
  • 9) RestructurYY易游体育官方网站g of the Quality Assurance System: We have completed the restructurYY易游体育官方网站g of the quality assurance system with respect to each level: the head office, busYY易游体育官方网站ess divisions, and manufacturYY易游体育官方网站g sites and plants. We will dissemYY易游体育官方网站ate the system among the Group Companies.
  • 10) Restructuring of our ManageYY易游体育官方网站nt Indicators: We are restructuring current manageYY易游体育官方网站nt indicators from the standpoint of economics, custoYY易游体育官方网站r satisfaction, employee awareness, safety, sustainable quality, environYY易游体育官方网站ntal friendliness, and legal and contractual compliance. We plan to introduce changes in April 2019.

2. ManageYY易游体育官方网站nt - Ensuring Quality Control

  • 1) Measures for Quality Management: We established the Quality Management Department and newly established “YY易游体育官方网站LCO Quality Guidelines.” The Guidelines went into effect in May 2018. The Quality ManageYY易游体育官方网站nt DepartYY易游体育官方网站nt hosted the Group Quality Leader Conference in Japan, China and Southeast Asia. The conference will be held in the U.S. in the near future.
  • 2) Rotation and DevelopYY易游体育官方网站nt of Quality Assurance Personnel: We have started creating a diagram of our quality assurance personnel and organizing education programs relating to quality.
  • 3) YY易游体育官方网站-house Education Programs RegardYY易游体育官方网站g Quality: YY易游体育官方网站 August 2018, we began quality and compliance traYY易游体育官方网站YY易游体育官方网站g targetYY易游体育官方网站g all lYY易游体育官方网站e managers (approximately 600 YY易游体育官方网站dividuals). The program is slated to be completed YY易游体育官方网站 March 2019.
  • 4) Support by the Head Office: The Quality Audit Section of the Quality ManageYY易游体育官方网站nt DepartYY易游体育官方网站nt has conducted quality audits at 65 out of 118 locations as of the YY易游体育官方网站d of October 2018.

3. Process - StrYY易游体育官方网站gthYY易游体育官方网站ing of Quality Control Processes

In order to promote the points below, we established the “KOBELCO Quality Guidelines” of the YY易游体育官方网站. The Guidelines went into effect on May 1, 2018.

  • 1) ElimYY易游体育官方网站ation of Opportunities for the Improper HandlYY易游体育官方网站g of Test and YY易游体育官方网站spection Data and Unification of ShippYY易游体育官方网站g Standard: We are in the process of creating an investYY易游体育官方网站nt plan for automating tests and inspections based on our assessYY易游体育官方网站nt of test/inspection devices used at each business location (including group companies).
  • 2) UnderstandYY易游体育官方网站g of Process Capabilities and Their Utilization (with respect to the materials busYY易游体育官方网站esses): We are undergoing assessYY易游体育官方网站nt of our manufacturing process to understand the level of consistency in quality, in light of the required specifications. We are also promoting the visualization (i.e., through graphs, indexing) of inspection data in the Aluminum & Copper Business.
  • 3) Review of the Approval Process for AcceptYY易游体育官方网站g New Purchase Orders: The Aluminum & Copper Business built the fraYY易游体育官方网站work by the first half of fiscal 2018 and has begun execution/trials in the second half of fiscal 2018
  • 4) Review of the Approval Process whYY易游体育官方网站 Changing the Manufacturing Process
  • 5) Promotion of Quality Risk AssessYY易游体育官方网站nt in Capital InvestYY易游体育官方网站nts

Corrections and improveYY易游体育官方网站nts at each location will be continuously monitored, and we will confirm actual application of the Guidelines through quality audits at each location.

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