Kobe Steel Collapses 37% After Admitting Falsifying Data: "Could Destroy International Faith In Japanese Manufacturing"

Japan's third-biggest steel producer is in trouble. After admitting falsifying data about the quality of aluminum and copper it sold, shares in Kobe Steel have collapsed 37%,  -20% limit down yesterday and another -17% at the open today following news that the falsification also involved iron powder product, in the biggest bloodbath the company has ever seen.

Bloomberg provides a quick Q&A:

1. What exactly did Kobe Steel falsify?
Data related to the products’ strength and durability. Kobe Steel says it discovered the falsification in inspections on goods shipped in the 12 months through August, affecting some 4 percent of shipments of aluminum and copper parts as well as castings and forgings. As yet, the company, which employs about 37,000 people, says there have been no reports of safety issues.


2. Was this a rogue event?
Hardly. The fabrication of figures was found at all four of Kobe Steel’s local aluminum plants in conduct the company described as “systematic.” For some items, the practice dated back some 10 years ago, according to executive vice president Naoto Umehara. Details have yet to emerge.


3. What do its customers say?
Here’s a taster. Toyota is “rapidly working to identify which vehicle models might be subject to this situation and what components were used,” according to spokesman Takashi Ogawa. "We recognize that this breach of compliance principles on the part of a supplier is a grave issue.” Toyota found the materials in question in hoods and doors, as did Honda Motor Co. Boeing, which gets some parts from Kobe Steel customer Subaru Corp., said there’s nothing to date that raises any safety concerns. Hitachi Ltd. said trains it has exported to the U.K. contained compromised metal as well as bullet trains in Japan. Mazda Motor Corp. also confirmed it uses aluminum from the company, while Suzuki Motor Corp. and Mitsubishi Motors Corp. all said they were checking whether their vehicles are affected.

After yesterday's limit down open (and no shift), today's 17% plunge following a report in the Yomiuri newspaper that Kobe may also have fabricated data on iron powder products used typically in components such as automotive gears, the stock smashed back to 12 month lows (and erased $1.7bn of the company's $4.5bn market cap as of Friday)...

This is the biggest 2-day drop and the heaviest volume in the history of the stock...

The scandal that is reverberating through the global supply chain...

And casting a new shadow over the country’s reputation for precision manufacturing, and as The New York Times reports, the fallout has the potential to spread to hundreds of companies.

Manufacturers of cars, aircraft and bullet trains have long relied on Kobe Steel to provide raw materials for their products, making the steel maker a crucial, if largely invisible, pillar of the Japanese economy.


The scandal hits a tender spot for Japan.


The country relies on its reputation for quality manufacturing as a selling point over China and other countries that offer cheaper alternatives. But its reputation has been marred by a series of problems at some of Japan’s biggest manufacturers.


Last week, Nissan Motor said unqualified staff members had carried out inspections at its factories, prompting the carmaker to recall 1.2 million vehicles, though it was not clear if the quality of the vehicles had been affected. Mitsubishi Motors and Suzuki Motor both admitted last year that they had been exaggerating the fuel economy of their vehicles by cheating on tests.


Perhaps the biggest blow to Japan’s reputation for quality has come from Takata, the airbag maker that was at the center of the largest auto safety recall in history, involving tens of millions of vehicles. Its faulty airbags have been blamed for more than a dozen deaths. Takata declared bankruptcy in June.

The extent of the problems at Kobe Steel are still unfolding: "The falsification problem has become an issue that could destroy international faith in Japanese manufacturing,” the Japanese financial newspaper Nikkei said in an article on Tuesday.


Francis Marx Tue, 10/10/2017 - 21:11 Permalink

Everything is fake. I like how the IMF comes out today saying every ones GDP around the world will be going up in 2018. HA! Global recession is more like it.

NoDebt tmosley Tue, 10/10/2017 - 22:49 Permalink

I wouldn't worry too much about it, Japan.  Our bankers forgive you for all the (many) past indiscretions, including that whole nuclear plant melt-down that nobody (including the environmentalists) are even willing to talk about.  They'll forgive you for this one, too.Hugs and kisses.- Goldman Sachs(NoDebt's personal commentary:  Fuck you Japanese assholes.  You run your country like a giant fucking legalized mafia.  We still remember "Japan, Inc." from the 80s.  Nothing has changed since then.  You're still as corrupt at a corporate level as the Catholic Church is covering up for pedophile preists.  You will NEVER change.  Your society prohibits that kind of change.  We know what you're about.  Continue enjoying your existence as our vassal state in the far east.  We're not letting you out from under our thumb for a long LONG time.) 

In reply to by tmosley

M2 NoDebt Wed, 10/11/2017 - 00:01 Permalink

Why the hostility towards Japan? Life in Japan is okay. It's safe, most people seem to do the right thing. Sure, people are brainwashed, but where aren't they? At least Japanese brainwashing (which starts in Kindy) is about doing what's right, not lying, waiting in line, seeing to the needs of others - and importantly, having patience and waiting your turn (and lots of singing traditional songs). Life in Japan is about maintaining cultural values. Which, when you HAVE a culture - you FEEL it is worth defending - you defend it. Part of that is imprinting the culture onto the next generation. That aside, if you think GoldmanSachs or any other Western Bank somehow runs Japan, you've really gone off the deep end. The Japanese Central bank is extinguishing around 100 billion dollars in debt a month, simply buying it with made up money, and selling it to itself, with zero affect on inflation (which runs absolutely counter to what the economists said would happen - the ones running GoldmanSachs included). At this rate, Japan won't have a debt in the near future. And thanks to traditional values, the ones that build the West and East, (like Christianity for the West), Japan will still BE "Japanese" in another 100 years. This is something you may want to think about in the West, because many cities in the USA are beginning to look more like Somalia. If the West doesn't start worrying more about the West, and basic values, including defending Catholics and other traditional institutes, there isn't going to BE a West.

In reply to by NoDebt

steve2241 Francis Marx Tue, 10/10/2017 - 21:29 Permalink

It's the fault of globalization.  Everything is being manufactured to the lowest common denominator.  Everything sold in the U.S.A. nowadays is shit.  Maybe Germany is the last man standing when it comes to quality goods.  I could be wrong, or it's the "least dirty shirt".  I don't think I'll be buying a Volkswagon any time soon, though.

In reply to by Francis Marx

NoDebt steve2241 Tue, 10/10/2017 - 22:40 Permalink

Germany is no exception, either.  Forget the Volkswagen diesel-gate stuff (the cars ran GREAT specifically because they cheated the tune, BTW).  The problem is that BMW/Merc/Audi quality is no longer the unassailable fortress it was in the 90s.  Their shit isn't even on par with a Mazda 3 any more, and it still costs a shit-ton more to fix when it does break.They are FULLY riding on their reputation at this point.  

In reply to by steve2241

Ruup2It Tue, 10/10/2017 - 21:12 Permalink

No Chinese auto mfg’s here.. Soon to be reduced Japanese stockpiles as well.. Government Motors channel stuffing conundrum might benefit.

mkkby Yen Cross Wed, 10/11/2017 - 03:25 Permalink

Lawyer's dream. Probably bankrupt the company.

My car/plane/train is rusting. Every crash will be due to out of spec parts.

That russian proverb (trust but verify) applies to everything in life. Any product you buy, the woman who claims to be on birth control, news/politics (no need to ever trust there).

In reply to by Yen Cross

wisehiney Tue, 10/10/2017 - 21:23 Permalink

Come on you fuckers!Hurry and tell us about how the "zionist" japs caused this shit.You fuckers are worse than cnn and msnbc are about Russia.Even someone who agrees with you gets tired of the same old tired bullshit comments.On every single fucking thread.Yeah, we get it..."The Jooz!"

wisehiney Giant Meteor Tue, 10/10/2017 - 21:40 Permalink

The Japanese-Jewish common ancestry theory is a fringe theory that appeared in the 17th century as a hypothesis which claimed the Japanese people were the main part of the ten lost tribes of Israel. A later version portrayed them as descendants of a tribe of Jewish Nestorians. Some versions of the theory applied to the whole population, but others only claimed that a specific group within the Japanese people had descended from Jews. Oh fuck.

In reply to by Giant Meteor

Francis Marx Tue, 10/10/2017 - 21:27 Permalink

Japanese typically lie about everything. Remember Fukushima? Oh no...there is no meltdown there....I hear if you go into a hospital in Japan and have cancer they wont tell you either.

motoXdude Tue, 10/10/2017 - 21:31 Permalink

Oh Pleeeeze say it isn't so!  I trust Japan's Air-Bags!  They're meticulous, engaged and thorough in their manufacturing and engineering.   My husband Morty is recoiling in TERROR thinking that our Buick has a recall for SRS!   Japan is PERFECT!  Nothing they make EVER BREAKS OR WEARS-OUT... Japan is GOD!

Kidbuck motoXdude Tue, 10/10/2017 - 23:51 Permalink

Kidbuck once had a job demonstrating the power of a detonated air bag to law enforcement officers. The only way to test an airbag is to set it off by applying 12 volts to its lead wires. I had free access to the impound lot of one of America's largest counties. I would randomly pick through the impounded and unclaimed cars and remove the airbags for my demonstrations. Less than 10 % failed to fire for my demonstrations.

In reply to by motoXdude

TradingTroll Tue, 10/10/2017 - 21:58 Permalink

My faith in Japanese manufacturing evaporated when in the Kobe earthquake the highway fell over and the support pillars weren't solid, as specified, but hollow.

This is nothing new.

HominyTwin Tue, 10/10/2017 - 21:47 Permalink

Just another leg down for Japan. See Youtube for lectures by Richard Verner on how Japanese financial system changed in the 80's to become more like ours, and how their economy has suffered since.

Atomizer Tue, 10/10/2017 - 21:50 Permalink

I worked for Kobe Steel subsiturary company for years. Good company. You just get burned out on flying the different time zones. Did it for 7 years starting 95??.. It was business class. It's where you become done. You get dark circles under eyes. Kobe was good to me. No complaints.I got burnt out. Good company. They paid me very well. Would go back on a less UTC zone schedule. 

Ryland Tue, 10/10/2017 - 22:02 Permalink

It won't destroy the publics faith in Japanese manufactureing unless it kills some reality tv star or some celebrity. The public is so tuned out of reality that none of this will matter, just a temporary price plunge to buy for the fools.