Kobe Steel Scandal Expands Into Core Business Overseas

Kobe Steel Scandal Expands Into Core Business Overseas

Kobe Steel Ltd.’s fake data scandal expanded to its core business after the company admitted “inappropriate actions” related to steel wire produced overseas.

Customers have been informed about the issue, which has been resolved, Tokyo-based spokeswoman Eimi Hamano said by phone, declining to provide details. Kobe Steel falsified quality certification data for steel wire used in auto engines and to strengthen tires, the Nikkei newspaper reported Friday.

Kobe’s admission of misconduct in its steel business, which accounts for about a third of revenue, ratchets up the pressure on Japan’s third-biggest steelmaker. The company’s disclosures had up until now dealt with aluminum, copper and iron ore products used in everything from cars to computer hard drives to Japan’s iconic bullet trains, although there haven’t been any reports of products being recalled or safety concerns raised.

Kobe’s shares have plunged 42 percent this week, including a 9.1 percent drop on Friday, after it revealed on Sunday that it had fudged data on the strength and durability of metals supplied to as many as 200 customers around the world, including Toyota Motor Corp., General Motors Co. and space rocket-maker Mitsubishi Heavy Industries Ltd.

The deepening scandal “suggests that this is company culture, not just the actions of a few rogue employees,” Alexander Robert Medd, managing director at Bucephalus Research Partnership Ltd. in Hong Kong, said by email. The question to be resolved is “were they trying to save money or just unable to produce the right spec in the right quantities,” he said.

The latest company to comment on its links to Kobe, Ford Motor Co., said Friday it used aluminum from the company in its Mondeo car hoods in China, although it hasn’t confirmed whether the parts were compromised. The affair has wiped $1.9 billion from the Japanese firm’s market value and led to speculation it could be broken up.

“This will come out in a trade sale and I suspect will lead to write offs,” according to Medd of Bucephalus Research, who said he’s concerned that a breakup of the business may not cover its liabilities from the scandal.

Investigations have been completed on about 100 of the companies that Kobe supplied, Chief Executive Officer Hiroya Kawasaki said Thursday. Falsified aluminum was shipped to more than 30 overseas firms including Tesla Inc., Daimler AG, PSA Group Ltd., Boeing Co., Airbus SE and General Electric Co., the Nikkei reported Friday, without saying where it obtained the information.

CEO Kawasaki is scheduled to hold a briefing in Tokyo Friday evening to disclose details about the misconduct related to steel wire and other findings, spokeswoman Hamano said.

— With assistance by Ichiro Suzuki, and Adrian Leung

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