Kobe steel scam hits planes, trains and automobiles
Gulf Times reported that Kobe Steel Ltd has made a startling admission: It sold products that failed quality control tests to more than 200 companies. Worse still, it did so not in error but by falsifying data to make it appear that items had made the grade. Aircraft, electronics, car and bullet train manufacturers were among the recipients, raising obvious safety concerns. From Boeing Inc to Toyota Motor Corp, companies are scrambling to check any affected products. And Japan Inc is facing up to another embarrassing scandal.
What exactly did Kobe Steel falsify?
The admissions have dribbled out, and more may follow. Initially, the company confessed to falsifying data about the strength and durability of some copper and aluminium that was used in cars and trains and possibly planes and a space rocket, too. Then Kobe Steel said it may also have faked data about iron ore powder and materials used in DVDs and LCD screens. The firm says it’s likely to uncover additional cases.
So this was no one-off?
Hardly. The fabrication of data relating to aluminium was found at all four of Kobe Steel’s local plants in conduct the company described as “systematic.” For some items, the practice dated back some 10 years, according to Kobe Steel executive vice president Naoto Umehara. The dodgy materials used in bullet trains were supplied over the past five years, according to one customer. Details of how the deception unfolded have yet to fully emerge.
Which companies were affected?
A who’s who of the transport industry. There are carmakers such as Toyota Motor Corp and Honda Motor Co; they used the suspect materials in hoods and doors. There’s Boeing Co, which is examining parts it gets from Kobe Steel customer Subaru Corp. Then there’s Hitachi Ltd, which said trains it has exported to the UK contained compromised metal as well as bullet trains in Japan. Central Japan Railway Co, the operator between Tokyo and Osaka, said two types of aluminium parts used to connect cars to wheels fell short in quality tests. West Japan Railway Co also found sub-standard parts. As yet, no company has flagged any serious safety concern as a result of the compromised products.
What is the company doing?
Chief executive officer Hiroya Kawasaki is leading a committee to probe the quality issues. He has run Kobe Steel since 2013, overseeing moves to expand the No 3 Japanese steelmaker’s presence in aluminium. “I deeply apologise for causing concern to many people, including all users and consumers,” Kawasaki said yesterday. Kobe Steel is likely to face lawsuits from investors, customers, consumers and regulators in Japan and US, experts say.
What’s the market’s verdict?
Shares in Kobe Steel plunged 36% in the two trading days after the company’s initial mea culpa, wiping out USD 1.6 billion of market value. Thanh Ha Pham, an analyst at Jefferies Japan Ltd said that “This is not going to be the end of Kobe Steel, it could be the end for management. It could result in the break-up of the company.”
More bad publicity for Japan’s manufacturers?
Japan Deputy Chief Cabinet Secretary Kotaro Nogami has said the faked data undermined the basis of fair trade, calling it “inappropriate”. It’s another scandal that threatens to undermine confidence in Japanese manufacturing. Shinko Wire Co, a Kobe Steel affiliate, in 2016 said a unit had misstated data on stainless steel wires and that it had supplied customers with alloy that failed to meet Japanese standards. Takata Corp pleaded guilty in the US in February to one count of wire fraud for misleading automakers about the safety of its exploding air bags. Toyo Tire & Rubber Co officials were referred to prosecutors in March after the company admitted falsifying data on rubber for earthquake-proofing buildings in 2015. And Nissan recalled more than 1mn cars in Japan in October.
Tainted aluminium may mean more hard drive failures
Kobe Steel Ltd’s admission they fudged information about the strength and durability of their aluminium products has spurred concerns cars, trains and airplanes may be compromised. It might also mean more hard drive failures.
The company supplies nearly 60% of the aluminium disc blanks used in the world’s hard drives with production centres in Japan and Malaysia, according to its latest annual report. Kobe Steel is one of only two major suppliers for the market and that means at the very worst hard drive failures could increase, according to Bloomberg Intelligence analyst Simon Chan.
Mr Chan said that “The impact to the product quality is if the tainted aluminium affects the disk stability when spinning at the speed necessary. We could see a higher failure rate for the hard disk drives.”
He said that any impact is likely limited as more consumers are buying electronics with solid-state drives that don’t spin, according to Chan. It is unlikely to trigger a recall for hard disk drives, unless we see evidence of higher failure rate due to material weakness.
Source : Gulf Times