Global upheaval after false data from steel giant

12 October, 2017, 11:35 | Author: Leticia Walters
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                                                            |By Yuka Obayashi

On Wednesday, Kobe Steel added two more products to the list of affected materials: powdered steel, which is used to create molded steel products like gears, and "target material", a specialty mix of several kinds of metal used in the production of DVDs, television screens and other electronics equipment. The industry ministry has pressed Kobe Steel to work with its clients, spread over a wide range of industries, to conduct urgent safety analysis.

It was unclear what the impact would be on earnings, the company said in a statement.

The stock dived 22 percent on Tuesday to finish at 1,068 yen ($9.50), its maximum daily loss limit - wiping nearly one billion dollars off the firm's market value.

Steel maker Kobe Steel has apologised after finding problems dating back to 2011 including faked inspections data for metals used in many products, including cars, bullet trains, aircraft and appliances.

Mr Kawasaki told reporters on Thursday that Japan's trade ministry also wants Kobe Steel to provide reasons for the data fabrication and prevention measures within a month, Reuters said.

Kobe Steel said it discovered the violations during internal inspections and "emergency quality audits". "Kobe Steel's technology is not something easily substitutable by others, and existing customers have nowhere else to go", said Yasuo Sakuma, Chief Investment Officer at Libra Investments in Tokyo. It also found one case of falsified data on iron powder products - material used for vehicle parts such as gears - that were shipped to a customer.

In Japan and overseas, manufacturers that have used Kobe Steel materials have been racing to check that the safety of their own products has not been compromised.

There have been previous cases in Japan involving falsified data, including at Nissan Motor 7201.T , Mitsubishi Motors 7211.T and Takata, which filed for bankruptcy this year over faulty airbags that were blamed for 17 deaths and scores of injuries. In 2015, it was revealed that Toyo Tire & Rubber fabricated data to secure government approval for materials to absorb shocks from earthquakes.

The corrosive business practices have raised broader questions over corporate governance in Japan, and cast doubt on the integrity of a manufacturing industry once the envy of the world. Conglomerate Toshiba Corp is still battling the fallout of a scandal over reporting inflated profits.

Toyota also confirmed that the material has been used in hoods and rear doors of some of its vehicles.

Kobe Steel shares closed at the limit low after being untraded for the whole session, diving 22 percent to 1068 yen.

The latest discovery was of falsification of data on 140 tons of steel powder supplied to one customer between April 2016 and March 2017.

Kobe Steel was founded in 1905 and has been a pillar of Japan's manufacturing sector. The cost of insuring against default on Kobe Steel's debt has risen sharply this week as the scandal unfolded.

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