TOKYO, 15 Oct 2017:
The cheating crisis engulfing Kobe Steel Ltd just got bigger.
Chief executive Hiroya Kawasaki on Friday revealed that about 500 companies had received its falsely certified products – more than double its earlier count – confirming widespread wrongdoing at the steelmaker that has sent a chill along global supply chains.
The scale of the misconduct at Japan’s third-largest steelmaker pummelled its shares as investors, worried about the financial impact and legal fallout, wiped about US$1.8 billion off its market value last week.
As the company revealed tampering of more products, the crisis has rippled through supply chains across the world in a body blow to Japan’s reputation as a high-quality manufacturing destination.
A contrite Kawasaki told a briefing the firm plans to pay customers’ costs for any affected products.
“There has been no specific requests, but we are prepared to shoulder such costs after consultations,” he said, adding that the products with tampered documentation account for about 4% of the sales in the affected businesses.
Yoshihiko Katsukawa, a managing executive officer, told reporters that 500 companies were now known to be affected by the tampering.
Kobe Steel initially said 200 firms were affected when it 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.
Asked if he plans to step down, Kawasaki said: “My biggest task right now is to help our customers make safety checks and to craft prevention measures.”
Boeing Co has some of the falsely certified products, said a source with knowledge of the matter – while stressing the world’s biggest maker of passenger jets does not consider the issue a safety problem.
More than 30 non-Japanese customers had been affected by the firm’s data fabrication, the Nikkei newspaper reported on Friday.
A Kobe Steel spokesman said the companies received its products but would not confirm they had any of the falsely certified components.
Nuclear power plant parts are the latest to join the list of affected equipment as Fukushima nuclear operator Tokyo Electric Power (Tepco) said on Friday it had taken delivery of pipes from Kobe Steel that were not checked properly.
The pipes were delivered to its Fukushima Daini station, located near the destroyed Fukushima Daiichi plant, but have not been used, Tepco said, adding it was checking all its facilities.
Faulty parts have also been found in Japan’s famous bullet trains that run at speeds as high as around 300kph and a space rocket that was launched in Japan earlier this week. One bullet train operator has already said it will seek compensation from Kobe Steel.
The government has ordered Kobe Steel to address safety concerns within about two weeks and report on how the misconduct occurred in a month. No safety issues have yet been identified in the unfolding imbroglio.
Kobe Steel, whose shares have fallen more than 40% since the scandal broke, faces a range of legal risks – including compensation sought by clients or their customers, penalties for violating unfair competition laws for false representation, shareholder lawsuits for the fall in the company’s stock price and class lawsuits from overseas customers seeking punitive damages, said a lawyer specialising in corporate laws and risk management.
“It is hard to predict the extent of legal costs,” said Motokazu Endo, a lawyer at Tokyo Kasumigaseki law office. “We cannot rule out the possibility that this will shake Kobe Steel to its foundation.”
The company has forecast a profit for the year through March 2018 after two successive annual losses.
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 earlier said the credibility of the firm “has plunged to zero.”
Growing list of affected firms
The following lists companies that have received falsely certified parts or are checking whether they have received them. Listed also are companies included in media reports.
- BOEING
Boeing Co, the world’s biggest maker of passenger jets, has used Kobe Steel products that include those falsely certified by the Japanese company, said a source with knowledge of the matter.
- AIRBUS
Airbus does not buy products directly from Japan’s Kobe Steel but is investigating whether any of its suppliers are affected by the cheating scandal, an Airbus spokesman said. The Nikkei newspaper had reported earlier that the aircraft maker had received Kobe Steel products with falsified specifications.
- TOYOTA
Toyota Motor Corp, Japan’s largest automaker, said the compliance breach was a “grave issue”, adding that Kobe Steel’s products were used in vehicle doors and hoods.
- NISSAN
Doors and hoods were also affected at Nissan Motor Co, a spokesman said. The automaker is grappling with its own compliance failures, recalling all new cars sold in Japan in the last three years after discovering final vehicle inspections were not performed by authorised technicians.
- HONDA, SUBARU
Honda Motor Co said doors and hoods were affected, while Subaru Corp said vehicles and aircraft were affected.
Japanese industry ministry officials said Kobe Steel materials were used in some defence equipment made by Subaru.
Other automakers affected by Kobe Steel’s announcement are Mazda Motor Corp and Mitsubishi Motors Corp, the companies confirmed.
- MITSUBISHI HEAVY
Mitsubishi Heavy Industries said Kobe Steel products were used on its Mitsubishi Regional Jet and rockets, including the H-2A rocket launched on Oct 10 to put a navigation satellite into orbit. The rocket cleared all safety checks before launch, the company said.
Japanese industry ministry officials said Kobe Steel materials were used in some defence equipment made by Mitsubishi Heavy.
- IHI
Heavy machinery maker IHI Corp said affected products were used in its jet engines.
IHI is a supplier for engines used on Boeing Co aircraft and in Japan’s defence and aerospace industries. The company did not say which engines used the affected products.
Japanese industry ministry officials said Kobe Steel materials were used in some defence equipment made by IHI.
- KAWASAKI HEAVY
Kawasaki Heavy Industries Ltd said affected materials were used in airplane parts and airplane engine parts while it was still investigating to see if there were any other products including trains that used affected materials.
Japanese industry ministry officials said Kobe Steel materials were used in some defence equipment made by Kawasaki Heavy.
- JR TOKAI
Central Japan Railway Company, which operates the bullet train line between Tokyo and Osaka, said falsely certified products from Kobe Steel were used in some train undercarriages. The products do not pose a safety risk and will be replaced.
- JR WEST
West Japan Railway said it has affected parts from Kobe Steel that were falsely certified and will seek compensation from the steelmaker.
- TEPCO
Fukushima nuclear operator Tokyo Electric Power said on Friday it had taken delivery of pipes from Kobe Steel that were not checked properly. The pipes were delivered to its Fukushima Daini station, located near the destroyed Fukushima Daiichi plant, but have not been used, Tepco said. Tepco was checking all its facilities.
- DAIMLER
Daimler AG said on Friday Kobe Steel is not a supplier after the Nikkei business daily reported the same day that it had received products from the steelmaker with falsified specifications.
- PSA GROUP
PSA Group also said on Friday Kobe Steel is not a supplier after the Nikkei reported it had also received products from the steelmaker with falsified specifications.
The Nikkei also said the following companies have been supplied with Kobe Steel products with faked specifications.
A Kobe Steel spokesman said the companies had all received parts and components originating from the steelmaker but did not confirm whether they had been tampered with.
The companies are listed below by sector, separated between Japanese and non-Japanese companies.
- Denso Corp, Suzuki Motor, Yamaha Motor, Sumitomo Wiring Systems, Takata Corp, Fujitsu, Yazaki Corp.
- Tesla, General Motors, Renault, Hyundai Motor, Daimler, Valeo and Volvo.
- Shimadzu Corp, Mitsui Engineering & Shipbuilding, NEC Corp, Yokohama Rubber and Komatsu.
- General Electric, Rolls-Royce, Korean Air Lines.
- Daikin Industries, Panasonic, Mitsubishi Electric, Hitachi Ltd, Toshiba Corp, Horiba Ltd, Nidec Corp.
– Reuters