Kobe Steel says steel division also falsely labelled products in widening cheating scandal

Boeing is carrying out a survey of aircraft to ascertain the extent and type of Kobe Steel components in its planes and will share the results with airline customers.
Kobe Steel Group (or Kobelco), Japan's third-biggest steelmaker, is under fire following cases of falsified data on the quality of products used in the car and aeronautic industry. PHOTO: EPA

TOKYO (REUTERS) - Kobe Steel Ltd said on Friday (Oct 13) that it has also found cases of false certification in its steel division, the latest in a string of revelations confirming widespread cheating at the firm that has engulfed its multinational clients, including Boeing Co., in a global safety scare.

The bombshell admissions by Japan's third-largest steel maker sent its shares plummeting again, with the scale of the misconduct dealing a body blow to the nation's reputation as a high-quality manufacturing destination.

Boeing Co, the world's biggest maker of passenger jets, has some of the falsely certified products, a source with knowledge of the matter told Reuters.

The Nikkei newspaper also on Friday said more than 30 non-Japanese customers including Daimler AG and Airbus SE had been affected by the firm's data fabrication. A Kobe Steel spokesman said the companies received its products but would not confirm they had any of the falsely certified components.

Chief Executive Hiroya Kawasaki will brief media later on Friday, the spokesman told Reuters, as the crisis ripples through supply chains across the world.

The company also confirmed another Nikkei report that it found cases of data tampering in its steel wire products. Customers have said there are no problems with the safety or function of the products, the spokesman said.

Kobe Steel shares were down 8.7 per cent by the morning break in trading, after stabilising on Thursday to close a touch higher. They had fallen nearly 40 per cent in the previous two days, wiping about US$1.6 billion (S$2.17 billion) off the company's market value.

"It will likely continue to be extremely difficult to make judgments on credit worthiness and investment until the safety of the products and the extent of damages are clarified", SMBC Nikko Securities said in a note to clients.

The latest revelations come after Kobe Steel admitted at the weekend it had falsified data about the quality of aluminium and copper products used in cars, aircraft, space rockets and defence equipment, affecting about 200 companies.

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

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

Kobe Steel said it was examining possible data falsification going back 10 years - a familiar echo of a string of other cheating scandals involving Japan inc.

The corrosive business practices have raised broader questions over corporate governance in Japan, and cast doubt on the integrity of a manufacturing industry once the envy of the world.

Previous cases in Japan involving falsified data included Nissan Motor, Mitsubishi Motors and Takata, which filed for bankruptcy this year over faulty airbags that were blamed for 17 deaths and scores of injuries.

In 2015, it was revealed that Toyo Tire & Rubber fabricated data to secure government approval for materials to absorb shocks from earthquakes. Conglomerate Toshiba Corp is still battling the fallout of a scandal over reporting inflated profits.

The government has ordered Kobe Steel to address safety concerns within about two weeks and report on how the misconduct occurred in a month.

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