Kobe Steel is Still in Trouble

Japanese automakers might have confirmed that have found no serious safety concerns with aluminum car parts supplied by Kobe Steel Ltd., but the company is still in serious trouble due to the steelmaker’s obligation to international clients. Kobe is now subject to potential investigations by the Japanese Ministry of Land, Infrastructure, Transport and Tourism, the U.S. Department of Justice, industry bodies, and international standards organizations.

The good news is drivers and carmakers were reassured today after Toyota, Honda, Nissan, and Mazda retested tainted car parts and found that they were still safe to operate. Basically, the steelmaker’s aluminum car parts were below automaker standards but still strong enough to allay any serious concerns. It’s not ideal, but no one’s driving around in a ticking time bomb like the Takata airbag nightmare.

Japanese executives have indicated that while they expect Kobe Steel to replace substandard components and pay for testing, they do not anticipate any lawsuits against the steelmaker. But even if Japanese automakers are willing to let Kobe Steel off the hook, far more litigious U.S. customers might not agree. In Japan, it’s not uncommon for manufacturers to accept products that do not meet exact specifications if they do not want to fight with their supplier, an industry practice known as tokusai. No one is expected to excuse fraud or date falsification, of course, but it’s part and parcel of tight-knit Japanese business culture.

In the United States, on the other hand, Kobe Steel should gear up for lawsuits seeking compensation for the tainted parts and a U.S. Department of Justice investigation. In Europe, aviation authorities are probing the steelmaker’s plane components. The Japanese government is expected to a release a report soon detailing any safety concerns that might impact bullet trains. Ironically, the most pressing threat doesn’t come from an angry defense contractor or the U.S. government, but the International Organization for Standardization.

If quality assurance organizations in Japan suspend or cancel the company’s ISO9001 quality management certification, the company’s global business will wither and die. Global buyers often require suppliers to have an up-to-date ISO9001, which makes sense. Global supply chains require trust and confidence based on agreed international standards. Date falsification might sound like small potatoes, but when you’re paying top dollar for Japanese components for complex machines like cars and rockets, you want a supplier that you can trust. Without ISO9001, it won’t matter if Kobe Steel gets a gentle rap on the wrist from Japanese carmakers. They’re still in serious trouble.