Home News Business Kobe Steel crisis deepens amid safety scare

Kobe Steel crisis deepens amid safety scare


Japan’s Kobe Steel plunged deeper into crisis on Wednesday as fresh revelations showed data fabrication at the steelmaker was more widespread than initially thought, heightening a safety scare along the global supply chain.

Investors, worried about the potential legal ramifications and the financial impact for Kobe, dumped the stock for a second day, wiping out nearly two-fifths of the market value of Japan’s third-biggest steelmaker.

Earlier on Wednesday, Kobe Steel said it may have fabricated data on iron powder products used in components such as automotive gears and was investigating the issue after media reported the abuses.

It has also launched an investigation into Kobelco Research Institute, which tests products for the company, the steelmaker said. The Nikkei newspaper reported the unit had shipped materials used for making semiconductors to customers without inspecting them.

The new revelations came after the steelmaker admitted over the weekend it had falsified data about the quality of aluminum and copper products used in cars, aircraft, space rockets and defense equipment in a fresh blow to Japanese manufacturers’ s vaunted reputation for quality production.

Kobe Steel has said it was examining other possible data falsifications going back 10 years.

The company faces potential costs from any recalls, replacements and any legal action, including class-action suits in the US where it has over-the-counter traded American Depositary Receipts, Yuji Matsumoto, an analyst at Nomura Securities, said in a report.

The revelations about data tampering in its aluminum unit could also hit its plans to expand the business as carmakers increasingly use the material, which is lighter than steel, to meet tighter environmental rules.

“Aluminum is one of the key focus areas in the medium term as part of its strategy to help lighten vehicles (and) this will certainly have a negative impact on the expansion,” Matsumoto said in the report.

Multinationals, including automakers like Toyota Motor and Ford Motor, and aircraft manufacturers Boeing and Mitsubishi Heavy Industries, have said they are investigating.

The market impact on Kobe Steel has been unforgiving, with its stock tumbling 18 per cent to 878 yen after dropping 22 per cent on Tuesday, wiping about $1.6 billion off its market value over two days. The deepening scandal has forced the government to push the company to speedily resolve the crisis.

“This inappropriate behaviour shakes the foundation of fair trading,” Deputy Chief Cabinet Secretary Kotaro Nogami told a regular news conference on Tuesday.