Japan’s Kobe Steel Hit by Quality Scandal

Government officials in Japan are urging steelmaker Kobe Steel to clarify the extent of inspection data manipulation over various metals used in a wide range of consumer and industrial products.  Reportedly this includes cars, rockets, and aircraft; and it is only the latest quality control scandal to hit the Japanese manufacturing sector.

The scandal comes after Japan’s third-largest steelmaker—Kobe Steel—announced that it had used falsified data to sell aluminum and copper materials over the past year. Kobe Steel managing executive officer, Yoshihiko Katsukawa comments that an internal probe found issues with the aluminum and copper business, but no other issues since the discovery of the original data tampering.

Furthermore, he notes that the company—which is now investigating the potential that these falsifications could go back a decade or more—has opened an external investigation, including units that are overseas.

Katsukawa comments, “We can’t rule out the possibility that the external investigation will find other cases,” adding that customers have not filed complaints or raised any safety concerns, nor has sales slowed.

Clarifying, Libra Investments (Tokyo) Chief Investment Officer, Yasuo Sakuma, notes, “The scandal looks similar to that of Toyo Tire, and not as massive (or) devastating as Takata‘s. Kobe Steel’s technology is not something easily substitutable by others, and existing customers have nowhere else to go.”

With that in mind, Kobe Steel now faces the potential costs of recalling and replacing the affected products. Of course, this would only be the beginning as it would obviously lead to litigation and that could include class-action law suits in the US.

For example, Robbins Geller Rudman & Dowd LLP partner Samuel Rudman comments, “I expect a wave of litigation as soon as people figure out what’s happened, who’s impacted and the company continues to admit things,” adding that his might be one of the firms that will pursue claims on behalf of “the whole gamut” of [everyone] affected.

This scandal comes at a crucial time, too, because carmakers continue to turn to aluminum—as it is lighter than steel—in order to more effectively meet tighter and tighter environmental restrictions.

Matsumoto goes on to say, “Aluminum is one of Kobe Steel’s 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.”