Scan­dal spreads as sub­stan­dard parts found in Ja­panese bul­let trains

New Haven Register (New Haven, CT) - - FRONT PAGE -

Kobe Steel’s fake data scan­dal pen­e­trated deeper into the most hal­lowed cor­ners of Ja­panese in­dus­try as iconic bul­let trains were found with sub­stan­dard parts sup­plied by the steel­maker.

While there’s no safety risk, two com­pa­nies op­er­at­ing the high-speed Shinkansen trains said they found Kobe Steel com­po­nents that failed to meet Ja­panese in­dus­try stan­dards. The chief ex­ec­u­tive of­fi­cer of the 112-year old steel­maker apol­o­gized for the cri­sis as com­pro­mised ma­te­ri­als turn up in ev­ery­thing from cars to DVDs. The af­fair has wiped off more than a third of the com­pany’s mar­ket value and led to spec­u­la­tion it may be bro­ken up.

The lat­est scan­dal to hit Ja­panese man­u­fac­tur­ing erupted Sun­day af­ter the coun­try’s third-largest steel­maker ad­mit­ted it faked data about the strength and dura­bil­ity of some alu­minum and cop­per. As clients from Toy­ota to Gen­eral Mo­tors scram­bled to de­ter­mine if they used the sus­pect ma­te­ri­als and whether safety was com­pro­mised in their cars, trains and planes, the com­pany said two more prod­ucts were af­fected and fur­ther cases could come to light. There have been no re­ports of prod­ucts be­ing re­called or safety con­cerns raised.

“I deeply apol­o­gize for caus­ing con­cern to many peo­ple, in­clud­ing all users and con­sumers,” Kobe Steel Chief Ex­ec­u­tive Of­fi­cer Hiroya Kawasaki said at a meet­ing with a se­nior govern­ment of­fi­cial on Thurs­day. He said trust in the com­pany has fallen to “zero” and he will work to re­store its rep­u­ta­tion. “Safety is the top pri­or­ity.”

Shares in the com­pany re­bounded 0.5 per­cent Thurs­day, af­ter plung­ing 36 per­cent over the pre­vi­ous two days. About $1.6 bil­lion of Kobe Steel’s mar­ket value has been wiped out since the rev­e­la­tions were made.

While shares col­lapsed, bond risk has spiked. Five-year credit-de­fault swaps in­sur­ing the com­pany’s debt against de­fault have jumped 222 ba­sis points to 279, the high­est since Fe­bru­ary 2016, ac­cord­ing to data from CMA.

Fig­ures were sys­tem­at­i­cally fab­ri­cated at all four of Kobe Steel’s lo­cal alu­minum plants, with the prac­tice dat­ing back as long as 10 years for some prod­ucts, the com­pany said Sun­day. Data was also faked for iron ore pow­der and tar­get ma­te­ri­als that are used in DVDs and LCD screens, it said three days later.

Cen­tral Ja­pan Rail­way Co., which op­er­ates bul­let trains between Tokyo and Osaka, said alu­minum com­po­nents con­nect­ing wheels to train cars failed Ja­panese in­dus­try stan­dards. Of the tested parts, 310 were found to be sub­stan­dard and will be re­placed at the next reg­u­lar in­spec­tion, spokesman Haruhiko Tomikubo said. They were pro­duced by Kobe Steel over the past five years, he said. West Ja­pan Rail­way Co, which runs ser­vices from Osaka to Fukuoka, also found sub-stan­dard parts made by Kobe Steel.

Bud­dhika Weeras­inghe / Bloomberg

A se­cu­rity guard de­scends steps near the en­trance of the Kobe Steel Ltd. head­quar­ters in Kobe, Hyogo, Ja­pan.

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