Company holds press conference on reform initiatives, confirms progress

Research evidence excerpt

Company holds press conference on reform initiatives, confirms progress

ndidates have proceeded largely on schedule. The

potential quality issues in question were also uncovered through the efforts of the

company's reform committee. While the potential quality issues are disappointing, we

interpret this disclosure as a sign that the company is making progress toward reforms.

The next checkpoints will be revisions to past earnings due to accounting irregularities,

submission of FY3/26 securities filings (by end-June), and the investigation committee’s

report on the potential quality issues (scheduled for end-August). We think the FY3/26

securities filing submission could be pushed back due to the need to assess the impact

of potential quality issues (meaning the company could possibly request an extension

of the submission deadline). Whether the audit firm issues an unqualified opinion will

also be a point to watch. While this depends on the timing, if the company can submit

an annual securities report with an unqualified opinion, this would represent progress

toward removal of the Securities on Special Alert designation.

The details of the potential quality issues are as follows. Approximately 1,000 cases

of potential quality issues have been confirmed to date, mainly relating to certain

appliance and automotive products. No cases have been confirmed in AI, industrial

machinery, or infrastructure. Some cases exist in IT, but these do not appear to

affect product functionality or safety. Of the cases of potential quality issues, 97%

involved changes to materials, processes, or designs without customer confirmation,

and 3% involved inappropriate handling of testing and inspection data or inappropriate

labeling of production locations.