Kobe Steel CEO Hiroya Kawasaki admitted on Friday that 500 companies have received metals that had false certifications for strength and durability. This is more than twice the initial number of affected companies and it is clear that label falsification was widespread and has infected the global metals supply chain. Kawasaki confirmed at a briefing that the steelmaker plans to reimburse customer costs for any affected products. The company’s misconduct has sent Kobe Steel Ltd. shares into free fall as investors consider the looming financial fallout.
Products with tampered documentation amount to 4 percent of company sales. This accounts for hundreds of companies and thousands of integral components in complex machines such as automobiles, trains, and planes. The steelmaker was a parts supplier for Japanese automakers including Honda, Toyota, and Nissan. Mitsubishi, Subaru, and others are checking their inventories to determine if any tainted materials entered their supply chain. If that wasn’t enough, the manufacturer supplied pipes for nuclear power plants and components for bullet trains and space rockets. Over 30 international companies received affected products from Kobe Steel, including Boeing. The Japanese government has demanded a safety assessment from the steelmaker in two weeks, and we have no doubt that commercial operators will be conducting their own investigations.
Coming on the heels of the Takata airbag disaster, the Kobe Steel scandal is another blow to Japan’s reputation for high-quality manufacturing.