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Japan's Kobe Steel tumbles after admitting to falsified data

11 October 2017

Japan's government sought on Tuesday to contain the fallout from the disclosure by the nation's third-biggest steel maker, Kobe Steel, that it had fabricated data on components used in cars, aircraft and space rockets, sending shock waves through the Japanese manufacturing sector.

Other companies affected include automakers such as Nissan Motor Co., Subaru Corp., Mazda Motor Corp., Mitsubishi Motors Corp. and Honda Motor Co., which have also said they used the affected aluminum products in their cars. Also Boeing Co., which gets some parts from Subaru, said there's nothing to date that raises any safety concerns.

Automaker Nissan Motor Co Ltd this month announced a recall of more than 1 million vehicles after admitting that workers without proper certification routinely conducted the final inspections for new vehicles to be sold in the domestic market.

The company said the fabrications, which might have started a decade ago, could affect products sent to as many as 200 companies.

Kobe has set up an investigation committee to address the issues, headed up by its Chairman, President and Chief Executive Officer Hiroya Kawasaki. The false data has been linked back to four aluminium factories in Japan, and for some items, the practice goes back almost 10 years, the executive vice president, Naoto Umehara confirmed.

Clients including Toyota Motor Corp., Honda Motor Co. and Subaru Corp. said they had used materials from Kobe Steel that have now been adjudged to be subject to falsification. "We recognize that this breach of compliance principles on the part of a supplier is a grave issue". The affected products account for about 4 percent of its shipments of aluminum and copper parts and aluminum castings and forgings.

"The incident is serious", said Takeshi Irisawa, an analyst at Tachibana Securities.

It is now unclear what impact the scandal will have on Kobe´s business performance. "There's a possibility that the company would have to shoulder the cost of a recall in addition to the cost for replacement".

Boeing also could be impacted through another company, Japan's IHI produces some engines for the US aircraft giant and also uses some Kobe Steel products. The company is now investigating the practice, but says so far there have been no safety concerns. Suzuki Motor Corp. and Mitsubishi Motors Corp. all said they are checking whether their vehicles are affected.

Also Mitsubishi Heavy Industries Ltd., which is charge of the MRJ regional jet and the H-IIA rocket launched by Japan Aerospace Exploration Agency on Tuesday for a satellite, said the firm's aluminum was used but no defects were found yet as the launch was a complete success according to a spokesperson, Genki Ono. The rocket cleared all safety checks before launch, the company said.

- Kawasaki Heavy Industries said many of its products use aluminum and it is now checking which ones used the material. "If the aluminum business doesn't work out well, I question where the company can make money", given the mainstay steel business remains one of low profitability, he said.

Toyo Tire & Rubber officials were referred to prosecutors in March following the company's 2015 admission that it had falsified data on rubber for earthquake-proofing buildings.