Kobe Steel admits to falsifying data over its product standards, affecting 500 firms

Japan’s third largest steel maker, Kobe, has revealed that they falsified information about the standards and safety of their steel products.

Kobe supplies steel to major companies across the globe, such as manufacturers of cars, aircrafts, trains and even space rockets.

The scandal has prompted major corporations to double-check their products. Some of Kobe Steel’s consumers and users include: Central Japan Railway; Hitachi (its trains are used in Britain); Mazda Motor Corp; Subaru Corp; Toyota Motor Corp; Mitsubishi Heavy Industries; Honda; General Motors; Daimler; Airbus

Kobe is blaming ‘poor controls and profit focus’ for the drop in product quality and the falsifying of reports to cover up the drop. The company admitted that it faked information about the strength and durability of its products for almost a decade.

The Japanese government has ordered an internal investigation to be conducted to see exactly what happened. Japan’s Ministry of Economy, Trade and Industry made the call and demanded answers over how the data was allowed to be falsified and what steps Kobe will take in light of the scandal.

Dozens of workers and managers across nine production sites were reportedly involved in falsifying the data involving aluminium castings, forgings, flat-rolled items, copper strips and tubes. The investigations also revealed that there were at least 70 cases of data tampering over 10 years.

Kobe said that 474 of 525 affected customers haven’t found any safety problems but this still leaves 51 customers with steel that may not be strong or durable enough for the intended purposes. With the nature of Kobe customer businesses, falsely-certified steel may have put thousands of people at risk.

Boeing and Central Japan Railway said some of the Kobe Steel they used was not up to standards but assured that there should not be any safety issues. However, the same can’t be said for all of Kobe’s consumers as its steel could be used in many other ways that relies on the metal’s purported strength and robust qualities. In light of the revelations, Kobe Steel could end up facing multiple claims from its consumers for compensation, as well as huge fines.

Kobe Steel has apologised for the scandal and expressed their deep regret. During a press conference, its executive vice-president took a deep bow and apologised to the public. Chief executive Hiroya Kawasaki noted that the company will be working on improving management and corporate governance while maintaining a culture where a concerned employee may be able to speak up freely.

The company is still awaiting results on how the scandal will affect its finances.

In November, they withdrew their yearly profit guidance over the uncertainty. In just one week, news of the dishonest behaviour reportedly wiped around £1.36 billion from share values. Companies who hide and cover up significant business matters from their investors and shareholders may be held liable for losses incurred when share values plummet.