Kobe Steel shares nose­dive as qual­ity scan­dal spreads

The Korea Times - - WORLD BUSINESS -

TOKYO (AFP) — Shares in Ja­pan’s Kobe Steel dived Fri­day on a re­port that its wi­den­ing qual­ity scan­dal has spread to more than 30 for­eign cus­tomers, in­clud­ing Boe­ing, Gen­eral Mo­tors, and French au­tomaker PSA.

The Tokyo-listed firm fell al­most nine per­cent to end the morn­ing at 805 yen ($7.20), down about 40 per­cent since the start of the week af­ter it ad­mit­ted fal­si­fy­ing strength and qual­ity data for an ar­ray of prod­ucts, a prac­tice that may have started a decade ago.

The em­bar­rass­ing scan­dal for Kobe Steel — a ven­er­a­ble firm that once em­ployed Prime Min­is­ter Shinzo Abe — has al­ready hit wide sec­tions of Ja­panese in­dus­try, in­clud­ing au­tomak­ers Toy­ota, Nis­san and Honda which used the af­fected ma­te­ri­als in their ve­hi­cles.

But Ja­pan’s lead­ing Nikkei busi­ness daily re­ported Fri­day that those prod­ucts were also used in planes built by Boe­ing and Air­bus and ve­hi­cles made by Gen­eral Mo­tors, Tesla, and Daim­ler.

On Thurs­day, the CEO of Ja­pan’s num­ber-three steel­maker warned that the qual­ity con­trol cri­sis was likely to wi­den at home and abroad, as he ac­knowl­edged that trust in the steel­maker has “fallen to zero.”

The firm is ex­pected to hold a news brief­ing later Fri­day.

Kobe Steel has ad­mit­ted fal­si­fy­ing qual­ity data for prod­ucts sold to some 200 clients.

It is the lat­est in a string of qual­ity con­trol and gov­er­nance scan­dals to hit ma­jor Ja­panese busi­nesses in re­cent years, un­der­min­ing the coun­try’s rep­u­ta­tion for qual­ity.

The qual­ity spec­i­fi­ca­tions were based on agree­ments be­tween the firm and its clients. The af­fected prod­ucts in­clude steel wires used in car en­gines and tyres — a key com­pany prod­uct — as well as alu­minium found in Ja­pan’s bullet trains as well as ma­te­ri­als in high-speed trains in Bri­tain, although it is not clear whether the scan­dal hit prod­uct safety.

“If it was found that there are safety prob­lems (with steel wires) it could shake the foun­da­tion of Kobe Steel,” Takayuki Atake, man­ager of credit re­search at SMBC Nikko Se­cu­ri­ties, said in a re­port.

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