Japan's Kobe Steel shares dive as quality scandal spreads

Marco Green
October 13, 2017

In a surprising turn of events a respectable Japanese Steel company, Kobe Steel Ltd has admitted to a wrong doing that has sent the auto manufacturing sector of Japan shockwaves that may develop into a strong quake if not handle properly. The official did not elaborate.

Both companies said the components do not pose any safety risks, and that they are considering replacing them during routine maintenance.

A government spokesman told CNNMoney that the Ministry of Economy, Trade and Industry has ordered Kobe Steel "to report the result of safety checks within around two weeks, and conduct a thorough investigation of the reason for data fabrication and prevention measures within a month".

He said he was not expecting to see recalls of cars or airplanes for now and none of the company's customers have canceled orders.

Shares in Kobe Steel stabilized on Thursday after investors, anxious about the financial impact and potential legal fallout, wiped about $1.6 billion off its market value in two days.

Will Kobe Steel become the next "Takata airbag" scandal to hit Japan? Five-year credit default swaps were at 57 basis points on October 5 and last traded at 305 basis points on Wednesday.

Hundreds of manufacturers including the carmakers General Motors, Toyota and Nissan were struggling to cope with the effects of an escalating quality scandal at Kobe Steel yesterday.

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.

But it said most of those materials, used to deposit thin films from materials onto components such as computer chips, were reinspected and are thought to have met customers' specifications. A total of 310 tested parts were found tobe substandard.

Steelmaker Kobe Steel apologized Thursday after finding wider problems, dating back to 2011, with faked inspections data for metals used in many products, including cars, bullet trains, aircraft and appliances.

In 2015, it was revealed that Toyo Tire & Rubber fabricated data to secure government approval for materials to absorb shocks from earthquakes.

Other reports by Click Lancashire

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