500 firms hit by cheating scandal: Kobe Steel CEO

A contrite Mr Hiroya Kawasaki, CEO of Kobe Steel, has said the company plans to pay customers' costs for any affected products.
A contrite Mr Hiroya Kawasaki, CEO of Kobe Steel, has said the company plans to pay customers' costs for any affected products.PHOTO: REUTERS

Crisis ripples through global supply chains, dealing body blow to Japan's reputation

TOKYO • The cheating crisis engulfing Kobe Steel just got bigger.

Chief executive Hiroya Kawasaki revealed yesterday that about 500 companies had received its falsely certified products, more than double its earlier count, confirming widespread wrongdoing at the steelmaker that has sent a chill throughout global supply chains.

The scale of the misconduct at Japan's third-largest steelmaker pummelled its shares as investors, worried about the financial impact and legal fallout, wiped about US$1.8 billion (S$2.4 billion) off its market value this week.

As the company revealed tampering of more products, the crisis has rippled through supply chains across the world in a body blow to Japan's reputation as a high-quality manufacturing destination.

A contrite Mr Kawasaki told a briefing the firm plans to pay customers' costs for any affected products. "There has been no specific requests, but we are prepared to shoulder such costs after consultations," he said, adding that products with tampered documentation account for about 4 per cent of the sales in the affected businesses.

Kobe Steel initially said 200 companies were affected when it admitted last weekend that it had falsified data about the quality of aluminium and copper products used in cars, aircraft, space rockets and defence equipment.

Asked if he plans to step down, Mr Kawasaki said: "My biggest task right now is to help our customers make safety checks and to craft prevention measures."​

  • $2.4b

    Amount wiped off Kobe Steel's market value this week.

Boeing has some of the falsely certified products, a source with knowledge of the matter said, while stressing that the world's biggest maker of passenger jets does not consider the issue a safety problem.

More than 30 non-Japanese customers had been affected by the firm's data fabrication, the Nikkei newspaper reported yesterday. A Kobe Steel spokesman said the companies received its products but would not confirm they had any of the falsely certified components.

Nuclear power plant parts are the latest to join the list of affected equipment as Fukushima nuclear operator Tokyo Electric Power (Tepco) yesterday said it had taken delivery of pipes from Kobe Steel that were not checked properly.

The pipes were delivered to its Fukushima Daini station, located near the destroyed Fukushima Daiichi plant, but have not been used, Tepco said, adding that it was checking all its facilities.

Faulty parts have also been found in Japan's famous bullet trains that run at speeds as high as 300kmh and a space rocket that was launched in the country earlier this week. One bullet train operator has already said it will seek compensation from Kobe Steel.

The government has ordered Kobe Steel to address safety concerns within about two weeks and report on how the misconduct occurred in a month. No safety issues have yet been identified in the unfolding imbroglio.

The company's shares fell nearly 9 per cent yesterday and have fallen more than 40 per cent since the scandal broke.

Kobe Steel, founded in 1905, is a pillar of Japan's manufacturing sector. Such are its establishment bona fides that Prime Minister Shinzo Abe, scion of a political dynasty, worked at the company decades ago, before entering politics.

But those credentials have now been shattered, a point amplified by Mr Kawasaki who earlier said the credibility of the firm "has plunged to zero".

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 14, 2017, with the headline '500 firms hit by cheating scandal: Kobe Steel CEO'. Print Edition | Subscribe