Supply Chain

Quality-Control Scandal Engulfs Kobe Steel

The steelmaker has admitted data falsification involving aluminum, copper and iron ore products, further tarnishing Japan's manufacturing reputation.
Matthew HellerOctober 11, 2017

Japan’s Kobe Steel on Wednesday added fuel to the fire of a scandal over the quality of products, saying it was investigating possible data falsification involving iron ore powder that was shipped to a customer.

The disclosure of the iron ore problem follows Kobe’s admission on Sunday that it had falsified data about the quality of aluminum and copper products used in cars, aircraft, space rockets and defense equipment.

Japan’s third-largest steelmaker is reviewing possible data manipulations going back a decade and has begun an external investigation into all its units. It does not believe safety has been compromised but an 18% drop on Wednesday brought its stock-market losses to $1.6 billion since the scandal broke.

“We can’t rule out the possibility that the external investigation will find other cases,” said Yoshihiko Katsukawa, a managing executive officer at Kobe Steel.

As The New York Times reports, the scandal “is reverberating through the global supply chain and casting a new shadow over [Japan’s] reputation for precision manufacturing.” One customer, Central Japan Railway, said some parts it received from Kobe for its bullet trains did not meet Japanese Industrial Standards, but there were no safety issues.

“The country relies on its reputation for quality manufacturing as a selling point over China and other countries that offer cheaper alternatives,” the Times said. “But its reputation has been marred by a series of problems at some of Japan’s biggest manufacturers.”

Kobe supplies materials to automakers Ford, Toyota, Honda, Mazda, and Subaru as well as aircraft makers Boeing and Mitsubishi Heavy Industries. It said employees at four of its factories had altered inspection certificates on aluminum and copper products to make it look as if the products met manufacturing specifications required by customers.

“We are working to quickly assess any potential impact on vehicle functionality,” Nissan said.

In perhaps Japan’s biggest quality-control scandal, Takata declared bankruptcy in June after its faulty airbags were blamed for about a dozen deaths. “The falsification problem has become an issue that could destroy international faith in Japanese manufacturing,” the Japanese financial newspaper Nikkei said.