Last weekend, Kobe Steel, Japan’s third-largest steel maker, admitted it may have falsified data to show that its aluminum and copper products had met customer specifications, and suggested the problems could be widespread. This week the company confirmed it had falsified data about the strength and durability of aluminum and copper products used in cars, aircraft, space rockets and defense equipment. The company further said it’s examining other possible data falsifications going back 10 years.
Kobe Steel said inspection data, such as on the strength of the products, were rewritten when customer specifications were not met. Kobe Steel Executive Vice President Naoto Umehara said workers were “feeling pressure” to meet the deadlines to deliver the products, but denied that data fabrication was ordered by senior management, a Japan Times article reports.
The company checked products shipped over the past year and found data fabrication in about 19,300 tons of aluminum products, 2,200 tons of copper products and 19,400 pieces of aluminum forging and casting products sold to more than 500 customers. While Kobe Steel didn’t disclose the names of the customers, aluminum products supplied with fabricated data were found to have been used in vehicles made by Toyota and Mitsubishi Regional Jet passenger planes, which are currently being developed by a subsidiary of Mitsubishi Heavy Industries Ltd., the Japan Times article reports.
An official of Mitsubishi Heavy said the aluminum products in question are unlikely to have safety problems and that the development of Mitsubishi Regional Jet will not be affected, Japan Times reports. The aircraft will be Japan’s first domestically developed jet airliner, although its delivery schedule has been repeatedly pushed back.
Toyota said it used the aluminum products in some car parts, such as hoods. The company is investigating which models were involved and the impact of using the products, Japan Times further reports.
The implications for Kobe Steel are just now coming to light. First, the company faces potential costs from any recalls, replacements and any legal action, including class-action suits in the U.S., Yuji Matsumoto, an analyst at Nomura Securities, said in a report, Reuters reports. What’s more, the revelations about data tampering in its aluminum unit could also hinder the company’s plans to expand the business as carmakers increasingly use the material, which is lighter than steel, to meet tighter environmental rules.
Of course, the incident may also trigger “déjà vu all over again” for investors, MarketWatch notes, since a Kobe affiliate, Shinko Wire Stainless Co, disclosed last year it faked data on tests for tensile strength of some stainless steel wire for springs for more than nine years.
The companies aren’t alone, however, in accusations of duping consumers and regulators about product and environmental quality and safety. For example, as the article points out, like Kobe Steel, India’s Tata Steel Ltd. has been accused of falsifying product quality certifications at its UK operations, and is under a Serious Fraud Office criminal investigation. Just last year, Japanese transport ministry officials raided the Tokyo headquarters of Mitsubishi and accused the company of cheating on fuel-efficiency tests for more than 25 years. And in other automotive emissions, two years ago, Volkswagen admitted it had rigged its diesel cars to cheat on emissions tests, and eventually implicated two more of Germany’s largest auto makers—Daimler and BMW. More recently, it seems the entire automotive industry is still reeling over the recalls of airbags from Japanese manufacturer Takata.
These types of incidents all cast a focus on supply chain visibility, but also on trust since it’s virtually impossible to tell what really happens in some suppliers’ plants. What are your thoughts on key suppliers falsifying information or certifications? Is your company prepared for potential disruption if a key supplier admits, or is accused, of falsifying information or product certifications?