LDN - Business

Kobe Steel says nearly 90 customers yet to confirm its products are safe

[October 26, 2017] By Yuka Obayashi and Taiga Uranaka

TOKYO (Reuters) - Kobe Steel Ltd said on Thursday 88 of its customers had yet to confirm its products were safe in the light of widespread tampering of specifications, but that it had not received any requests for recalls.

Twenty-six of these customers are overseas companies, Kobe Steel's CEO Hiroya Kawasaki told a news conference. He did not name any of the companies.

Japan's third-largest steelmaker, which supplies manufacturers of cars, planes, trains and other products across the world, said earlier this month that about 500 of its customers had received products with falsified specifications, in one of Japan's biggest industrial scandals.

"The scope of the wrongdoing found is far beyond what I had imagined at the start of the probe," Kawasaki said.

Kawasaki updated the total number of affected customers to 525 on Thursday and said the company had assessed there were no safety issues with falsely certified products sent to 437 customers.

Of these, 229 customers had confirmed the safety of the products, 91 had found no immediate safety issues and the rest were deemed to be safe by Kobe Steel's own experts.

However, Kobe Steel has lost a badge certifying the industrial quality of some of its products, which experts have said could affect its contracts with customers. There have been no cancellations as yet, Kobe Steel has said.

The company said its Japanese Industrial Standards (JIS) certificate was revoked for some copper products from its Hatano plant near Tokyo.

It also found five more possible cases of data cheating.

Kawasaki said he did not expect more cases where the company is found to have breached Japanese industrial standards, adding the company would comment on the financial impact of the scandal when it releases its earnings on Monday.

Kobe Steel, which lost the JIS quality badge on some stainless steel products after finding cases of tampered product quality data last year, may have more certificates revoked, an industry ministry official said at a later media briefing.

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Kobe Steel President and CEO Hiroya Kawasaki attends a news conference in Tokyo, Japan, October 26, 2017. REUTERS/Toru Hanai

"There is a possibility for other plants to lose (the) JIS standard," Naotake Fujishiro, director of the international standardization division of the Ministry of Economy, Trade and Industry, said.

No other Japanese company has lost JIS quality assurance certificates two years in a row, Fujishiro said.

Another official at the ministry said Kobe Steel had been told to speed up its safety checks on the remaining products after reporting its findings to the government on Thursday.

Kobe Steel's Hatano copper tube plant southwest of Tokyo has been inspected by a certification company to see whether it has complied with the JIS in terms of quality management systems and product specifications.

"We have been told by the certification company that the JIS H 3300 certificate for copper and copper alloy seamless tubes has been revoked due to improper quality management at the plant," a Kobe Steel spokesman said before the news conference.

As a result of the revocation, it will be no longer able to sell those products with the JIS label. But they can still be sold without the certificate. The JIS-certified products account for about 40 percent of Hatano's sales by weight, the company said.

Still, customers may switch suppliers or pick Kobe's competitors for future orders, industry experts said.

Global automakers, aircraft companies and other manufacturers have scrambled to identify potential hazards in their products because of the falsification. Four Japanese carmakers said last week they had found no safety issues with aluminum parts supplied by Kobe Steel.

The company is also subject to a U.S. Justice Department probe while checks continue at clients involved in complex supply chains spanning the globe.

Kobe Steel shares, which are down about 35 percent since the scandal broke, fell 1.5 percent on Thursday. The Nikkei 225 was up slightly on the day.

(Writing by Aaron Sheldrick; Editing by Chang-Ran Kim, Raju Gopalakrishnan and Mark Potter)

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