By Daniel Leussink
TOKYO (Reuters) -Shares of Japan’s Nidec plummeted a record 22% on Thursday after the electric motor maker said it would set up an independent committee to investigate the possible involvement of management in improper accounting.
The accounting issues add to investor concerns about governance at the company long dominated by its 81-year-old founder, billionaire Chairman Shigenobu Nagamori, analysts said.
Nidec shares ended down 700 yen at 2,420 yen in their biggest single-day percentage drop and the maximum decline allowed for the session. With that drop, the stock is down about 15% this year, compared with a 10% gain in the broad Topix index.
The Kyoto-based maker of automotive components and precision motors used in electric vehicles said after Wednesday’s market close that it would set up a third-party committee after internal probes found “suspected improper accounting” at a Chinese unit of Nidec Techno Motor.
The internal probes found evidence suggesting a possible link to the management of Nidec or group companies, Nidec said in a statement.
“The investigations found multiple documents suggesting that, in addition to Techno, the Company (Nidec) and its group companies could have engaged in improper accounting with the involvement or knowledge of its or their management,” it said.
In an effort to offset heavy price competition in China’s EV market, Nidec has been trying to diversify beyond its core automotive motor business, seeking to benefit from a surge in demand for water-cooling modules for artificial intelligence data centres.
“Looking at today’s stock price reaction, I think concerns about Nidec’s management and internal controls are surfacing again,” said Ryousuke Kiyota, senior analyst at Tokai Tokyo Intelligence Laboratory.
REPEATED ACCOUNTING SCRUTINY
Nagamori – who owns over 8% of Nidec’s outstanding shares and whose cartoon biography on the company website calls him “the man hotter than the sun” – has long left his mark, building the company into a global powerhouse through scores of acquisitions over the decades.
Last year, Nidec picked a new CEO from its automotive business to succeed Nagamori after the bluntly spoken founder made a surprise return as chief executive amid a long-running succession saga.
On Wednesday, Nidec said internal probes triggered by a September 2024 payment of 10 million yuan ($1.4 million) at a Chinese subsidiary uncovered documents suggesting wider improper accounting practices. Management may have been aware that Nidec or group companies could appear to have “arbitrarily” timed the writedown of some assets, the company statement said.
It did not offer more detail.
A Nidec spokesperson declined to comment beyond Wednesday’s statement, adding the company may issue another announcement as the third-party committee’s investigation progresses.
Less than three months ago, Nidec postponed its annual report over potential errors in country-of-origin declarations for motors that may have resulted in unpaid import duties at a subsidiary in Italy.
Nidec said the errors related to the subsidiary in Italy are outside the scope of the matters to be probed by the third-party committee.
In May 2024, the company revised down two years of operating profit by about $67 million after determining that some sales at a subsidiary were “recorded in an inflated manner”.
Nidec faced accounting scrutiny in 2016, when short-seller Muddy Waters accused the company of highly aggressive accounting and consistently missing sales targets – allegations Nidec dismissed.
The company has positioned itself as a critical supplier in the transition to electric vehicles, investing heavily in production of EV drive units.
($1 = 7.1529 Chinese yuan renminbi)
(Reporting by Mariko Katsumura, Daniel Leussink and Rocky Swift; Editing by William Mallard)
