Kobe Steel scandal hurts Japan's reputation

Kobe Steel's executive vice-president Naoto Umehara (right) apologising at a news conference in Tokyo on Sunday. Shares of the company plunged 22 per cent.
Kobe Steel's executive vice-president Naoto Umehara (right) apologising at a news conference in Tokyo on Sunday. Shares of the company plunged 22 per cent.PHOTO: REUTERS

No safety issues yet, but it raises doubts over manufacturers' integrity

TOKYO • The industrial scandal engulfing Kobe Steel began to reverberate overseas as Japan's third-biggest steelmaker said its staff falsified data about the strength and durability of some aluminium and copper products used in planes, trains and potentially a space rocket.

Shares in Japan's third-biggest steelmaker plunged 22 per cent and bond risk jumped to a 19-month high as customers including Toyota Motor, Honda Motor and Subaru said they had used materials from Kobe Steel that were subject to falsification, while Hitachi said trains exported to Britain were affected.

Kobe Steel said it discovered the falsification in inspections on products shipped from September last year to August this year.

It added that there have not been any reports of safety issues.

The products account for 4 per cent of shipments of aluminium and copper parts as well as castings and forgings.

It could cost the company as much as 15 billion yen (S$181 million) to replace the parts it sold, assuming 5 per cent of its aluminium product sales were affected, JPMorgan Securities Japan estimated.

 
 

Kobe Steel's admission raises fresh concern about the integrity of Japanese manufacturers.

  • Products shipped to 200 firms

  • The Kobe Steel products were shipped to around 200 companies, which included some of Japan's most recognisable names.

    The carmakers affected included Toyota Motor, Honda Motor, Nissan Motor, Mazda Motor, Subaru and Mitsubishi Motors, the respective companies confirmed.

    Mitsubishi Heavy Industries said Kobe Steel products were used on its Mitsubishi Regional Jet and rockets, including the H-2A rocket launched yesterday. The rocket cleared all safety checks before launch, the firm said.

    Japanese Industry Ministry officials said Kobe Steel materials were used in some defence equipment made by Mitsubishi Heavy.

    Heavy machinery maker IHI Corp said affected products were used in its jet engines. IHI is a supplier for engines used on Boeing aircraft and in Japan's defence and aerospace industries.

    REUTERS

Nissan Motor last week said it would recall more than one million cars after regulators discovered unauthorised inspectors approved vehicle quality, while Takata pleaded guilty this year of misleading carmakers about the safety of its airbags.

Kobe Steel said the products were delivered to around 200 companies, with the falsification intended to make the metals look as if they met client quality standards.

The fabrication of figures was found at all four of Kobe Steel's local aluminium plants in conduct that was systematic, and for some items, the practice dated back for about 10 years, executive vice-president Naoto Umehara said on Sunday.

Kobe Steel, one of Japan's oldest industrial companies, was founded more than a century ago.

Headquartered in the western port city, it made about seven million metric tonnes of crude steel in the year to March, as well as aluminium and copper.

"We are rapidly working to identify which vehicle models might be subject to this situation and what components were used," Toyota spokesman Takashi Ogawa said.

"We recognise that this breach of compliance principles on the part of a supplier is a grave issue."

Analyst Takeshi Irisawa of Tachibana Securities said: "At the moment, the impact is unclear, but if this leads to recalls, the cost would be huge."

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A version of this article appeared in the print edition of The Straits Times on October 11, 2017, with the headline 'Kobe Steel scandal hurts Japan's reputation'. Print Edition | Subscribe