Kobe Steel Finds Four More Cases of Suspected Faked Data

(Bloomberg) -- Kobe Steel Ltd. said it found four more suspected cases of falsified data, widening a scandal that’s slashed more than a third off the Japanese steelmaker’s market value since it broke Oct. 8.

Some of the products affected were produced by Shinko Engineering, its machinery manufacturing unit, Kobe Steel President Hiroya Kawasaki said Thursday at a press conference in Tokyo. The company will set up an independent review committee to help fix the problems and submit its findings by year-end, he said.

“The boil’s being lanced,” Kawasaki said.

Manufacturers including automotive giant Toyota Motor Corp. and plane maker Boeing Co. are among more than 500 customers affected by a supply chain tainted by revelations that Kobe falsified certifications on the strength and durability of metals going back to at least 2007. The business units implicated in the crisis include the steel, copper, aluminum and machinery departments, accounting for more than half the company’s revenue.

Kobe Steel said it knows of no customers that have stopped using its products or begun recalls of affected materials. There have been no reports of any safety issues.

The new revelations follow the company’s disclosure earlier Thursday that a factory run by one of Kobe Steel’s units in Kanagawa prefecture lost its Japanese Industrial Standards certification.

Quality Controls

The Kobelco & Materials Copper Tube factory lost the designation because it wasn’t following JIS regulations, Kobe Steel said Thursday in a statement. Some customers require the certification, which verifies that products meet prescribed standards.

Shares of Kobe Steel, which have dropped 35 percent since the company admitted to the problem on Oct. 8, fell 1.5 percent to 895 yen in Tokyo.

As the inspections on JIS certification expand, “it’s likely they’ll find other factories that weren’t following regulations,” said Takeshi Irisawa, an analyst at Tachibana Securities Co. “It’s unclear at this moment what type of impact this will have on the company, but it is bad.”

Japanese Trade Minister Hiroshige Seko said Tuesday that he told JIS’s certifying body to expand checks on Kobe Steel products. Kawasaki didn’t rule out the possibility that other facilities may have also breached JIS regulations. Executive Vice President Naoto Umehara said last week that the company had discovered the Kanagawa facility was producing products more than a year ago that didn’t meet JIS standards.

The factory fudged numbers for about 25 tons of copper pipes shipped between September 2016 and August 2017 to four customers, the company said last week. The facility has capacity to produce 60,000 tons of pipes a year for use primarily in air conditioners and water-heating systems for buildings. The products with JIS stamps make up about 40 percent of sales at the plant, Kobe Steel said.

--With assistance from Ichiro Suzuki and Tsuyoshi Inajima

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net, Stephen Stapczynski in Tokyo at sstapczynsk1@bloomberg.net.

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Steve Dickson, Abhay Singh

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