February 22, 2018

Metal Falsification Scandal Rocks Auto Industry; Subaru, Toyota, Honda

11 October 2017, 12:23 | Austin Hogan

Kobe Steel Says It Falsified Data

Kobe Steel Says It Falsified Data

Kobe Steel's probe has so far found that data were falsified for about 19,300 tonnes of aluminum products, 2,200 tonnes of copper products and 19,400 units of aluminum castings and forgings shipped to clients between September past year and August.

Toyota is one of 200 companies potentially impacted by Kobe Steel's fraudulent practices; however, its US built vehicle appear to be unaffected.

"The scope of it is in some ways is really quite breathtaking", said Tim McDonald from the BBC. And Toshiba's Westinghouse Electric Co. Mitsubishi Heavy Industries Ltd. used some of the metal in question to build regional jets and rockets, but said a successful space launch this week allayed some of its fears.

Subaru also produces wings for Boeing Co., but the aerospace company said nothing in its review has convinced it there's a safety issue. Nissan has already said aluminum hoods that fail to meet specifications could pose a risk to pedestrians during front-end collisions, while Toyota said the metal could have been used in some of its hoods and rear doors.

"The impact on financials is unclear, but could be substantial depending on request (s) for replacement/recall", Jefferies analyst Thanh Ha Pham said in a note. Kobe didn't say if customers outside of the country were impacted, though Toyota said the faulty materials were only supplied to its plants in Japan.

Some of the biggest auto manufacturers including Toyota and Honda are affected by an industrial scandal in Japan over falsified data relating to the strength and durability of aluminium used in the production of their cars. Kobe Steel said it not had recognized specific problems casting doubts on the safety of the nonconforming products and that the episode had brought overwhelming shame. The misconduct involved dozens of staff and possibly stretched back 10 years, the company said.

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"Aluminium is a strategic business for Kobe Steel", said Irisawa at Tachibana Securities. "We recognize this as an improper act that will shake fair trading", Yasuji Komiyama, director at the metal industries division, told reporters in Tokyo.

The falsification was meant to make the metals look as though they met client quality standards.

In other product-related cases, Takata pleaded guilty in the February to one count of wire fraud for misleading automakers about the safety of its air bags.

Toyo Tire & Rubber officials were referred to prosecutors in March following the company's 2015 admission that it had falsified data on rubber for earthquake-proofing buildings.

"With a string of negative surprises at Kobe Steel lately, we believe investors are likely to distrust management even more due to this latest incident, despite emerging signs of earnings improvement in the steel and construction machinery segments", JPMorgan's Mori wrote.

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