Kobe Steel scandal deepens as more falsification unearthed, 6 Japanese carmakers affected

The Kobe Steel headquarters in Kobe, Japan. PHOTO: BLOOMBERG

TOKYO (BLOOMBERG, AFP) - The scandal engulfing Kobe Steel that has rocked industrial Japan deepened on Wednesday (Oct 11), with the steelmaker saying its falsification of product data extended beyond copper and aluminium. Incorrect information had also been found on iron powder and reports said six of Japan's best-known carmakers had also been affected.

The country's third-largest steelmaker discovered data on the material that failed to meet a customer's requirements, spokesman Yoshitsugu Nishimura said by phone, confirming a report in the Yomiuri newspaper. The company's shares tumbled 15 per cent in Tokyo after a 22 per cent loss on Tuesday.

The details are under investigation for a single iron powder product that was delivered to one customer, Mr Nishimura said, declining to identify the customer. The company does not see a problem with the safety of the product, according to Mr Nishimura.

Kobe Steel is at the centre of a scandal since it admitted on Sunday that staff at several plants had falsified metals product data for years.

An internal probe had revealed that data was fabricated for about 19,300 tonnes of aluminium products, 2,200 tonnes of copper products and 19,400 units of aluminium castings and forgings shipped to clients from September 2016 through August 2017.

The company said the fabrications, which might have started a decade ago, could affect products sent to as many as 200 companies. It was not clear whether the scandal affects the safety of their products.

The revelation is a further blow to the reputation and trustworthiness of Japan's industrial companies, and has sent customers from Toyota Motor to Subaru scrambling to determine whether they had used the suspect materials.

Toyota has said that Kobe Steel supplied materials to one of its Japanese factories, which used them in hoods, rear doors and surrounding areas of certain vehicles.

Business daily Nikkei said Mitsubishi Motors, Subaru and Mazda had also used products from Kobe Steel in their vehicles.

According to Nikkei, the Transport Ministry has asked the car manufacturers to conduct urgent checks to see if recalls are necessary.

It also comes as an additional headache for Nissan, which has already announced a recall of more than a million vehicles in the domestic market over a certification issue.

One estimate from JPMorgan Securities Japan put the potential cost of replacing the copper and aluminium parts at about 15 billion yen (S$181 million). But the damage to the company, which is more than a century old - both in reputational harm or possible legal challenges- may be much greater.

The market impact has already been savage as investors take fright at the possible consequences. While at Friday's close, Kobe Steel had a market value of 498 billion yen, by Tuesday, that was down to 389 billion yen, and it fell further to about 328 billion yen on Wednesday. In dollar terms, that is a drop of about US$1.5 billion (S$2 billion), according to Bloomberg calculations.

Iron ore powder is mainly used in making automobile components, according to Kobe Steel. Powders can be hardened to produce sintered parts, which are used in everything from the engine to the steering mechanism, as well as brakes, suspension and transmission, according to JFE Steel, another Japanese producer.

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