https://www.bloomberg.com/news/arti...nes-trains-automobiles-quicktake-q-a-j8pto39q
Kobe Steel Scam Hits Planes, Trains, Automobiles
By
Masumi Suga
and
Chikako Mogi
October 13, 2017, 7:41 AM EDT
From
Venable's Strickland on Kobe Steel Scandal's Safety Risks
Kobe Steel Ltd. has made a startling admission: It sold products that failed quality control tests to about 500 companies. Worse still, it did so not in error but by falsifying data to make it appear that items had made the grade. Aircraft, electronics, car and bullet train manufacturers were among the recipients, raising obvious safety concerns. From Boeing Co. to Ford Motor Co., companies are scrambling to check any affected products. And Japan Inc. is facing up to another embarrassing scandal.
1. What exactly did Kobe Steel falsify?
The admissions have dribbled out, and more may follow. Initially, the company confessed to falsifying data about the strength and durability of some copper and aluminum that was used in cars and trains and possibly planes and a space rocket, too. Then Kobe Steel said it also faked data about iron ore powder and materials used in DVDs and LCD screens. Chief Executive Officer Hiroya Kawasaki said on Oct. 12 more cases could emerge as the company continues its investigations. A day later it flagged misconduct related to more items including steel wire and copper piping, some of which were produced overseas.
2. So this was no one-off?
Hardly. The fabrication of data relating to aluminum was found at all four of Kobe Steel’s local plants in conduct the company described as “systematic.” For some items, the practice dated back some 10 years, according to Kobe Steel Executive Vice President Naoto Umehara. The dodgy materials used in bullet trains were supplied over the past five years, according to one customer. Details of how the deception unfolded have yet to fully emerge but the company has said it’ll release the findings of safety checks for the products in about two weeks, and the causes of the issue and planned countermeasures within a month.
3. Which companies were affected?
A who’s who of the transport industry. There are carmakers such as Toyota Motor Corp. and Honda Motor Co.; they used the suspect materials in hoods and doors. There’s Boeing, which is examining parts it gets from Kobe Steel customer Subaru Corp. Hitachi Ltd. said trains it has exported to the U.K. contained compromised metal as well as bullet trains in Japan. Central Japan Railway Co., which runs the iconic trains between Tokyo and Osaka, said two types of aluminum parts used to connect cars to wheels fell short in quality tests. West Japan Railway Co. also found sub-standard parts. Ford said it used aluminum from the company in its Mondeo car hoods in China, although it hasn’t confirmed whether the parts were compromised. As yet, no company has flagged any serious safety concern as a result of the compromised products.
4. What is the company doing?
CEO Kawasaki is leading a committee to probe the quality issues. He has run Kobe Steel since 2013, overseeing moves to expand the No. 3 Japanese steelmaker’s presence in aluminum. “I deeply apologize for causing concern to many people, including all users and consumers,” Kawasaki said Oct. 12. Kobe Steel is likely to face lawsuits from investors, customers, consumers and regulators in Japan and U.S., experts say.
5. What’s the market’s verdict?
Shares in Kobe Steel have plunged 42 percent since its initial mea culpa, wiping out $1.8 billion of market value. “This is not going to be the end of Kobe Steel, it could be the end for management,” said Thanh Ha Pham, an analyst at Jefferies Japan Ltd. “It could result in the break-up of the company.” The cost to protect Kobe Steel’s bonds against non-payment rose nearly 250 basis points in the week after the revelations, the highest in 20 months, as investors raced to reduce or hedge their exposure.
6. More bad publicity for Japan’s manufacturers?
Japan Deputy Chief Cabinet Secretary Kotaro Nogami has said the faked data undermined the basis of fair trade, calling it “inappropriate”. It’s another scandal that threatens to undermine confidence in Japanese manufacturing. Shinko Wire Co., a Kobe Steel affiliate, in 2016 said a unit had misstated data on stainless steel wires and that it had supplied customers with alloy that failed to meet Japanese standards. Takata Corp. pleaded guilty in the U.S. in February to one count of wire fraud for misleading automakers about the safety of its exploding air bags. Toyo Tire & Rubber Co. officials were referred to prosecutors in March after the company admitted falsifying data on rubber for earthquake-proofing buildings in 2015. And Nissan recalled more than 1 million cars in Japan in October.
The Reference Shelf
http://www.zerohedge.com/news/2017-...r-company-faked-data-decades-had-fraud-manual
Kobe Steel Scandal Goes Nuclear: Company Faked Data For Decades, Had A "Fraud Manual"
by Tyler Durden
Oct 16, 2017 8:00 PM
Last week we reported that in the latest instance of criminal Japanese corporate malfeasance, Japan's third-biggest steel producer admitted falsifying data about the quality of steel, aluminum, copper, iron powder and other products it sold to customers across virtually every single industry. The news sent the company's stock tumbling 43% from levels before the scandal broke, to the lowest price since 2012.
The downstream impact was quickly felt, with selling hitting names across the global supply chain...
... while the NYT reported that the fallout has the potential to spread to hundreds of companies. As of a week ago, the extent of the problems at Kobe Steel was still unfolding, and prompte the Nikkei newspaper to conclude that "the falsification problem has become an issue that could destroy international faith in Japanese manufacturing."
Well, as of moments ago that tipping point was this much closer, when the same Nikkei reported that some Kobe Steel plants in Japan had been falsifying product quality data for decades, well beyond the roughly 10-year time frame given by the lying steelmaker. According to the Japanese newspaper, "employees involved in the data manipulation used the industry term tokusai to refer to shipping of products that did not meet the standards requested by customers", the Nikkei source said. Though tokusai usually refers to voluntary acceptance of such products, plants sometimes sent substandard goods without customers' consent. The word was apparently in use at some plants for 40 to 50 years.
But wait, it gets better.
Not only did the company, having already been caught, lie to shareholders and rule-abiding employees how long this illegal behavior had been going on, but - in a glaring example of corporate idiocy - had effectively enshrined and codified its fraudulent ways, as the cheating procedures eventually became institutionalized in what was essentially a tacit fraud manual, allowing the practice to continue as managers came and went.
Meanwhile, the Nikkei also reports that everyone could have been in on it, as data manipulation may have occurred with the knowledge of plant foremen and quality control managers. Some shipments even came with forged inspection certificates.
Kobe Steel has tapped senior officials in the aluminum and copper business - where most of the misconduct took place - to serve on its board. How far up the chain of command knowledge of the fraud may have extended in the past remains an open question.
According to the latest update, systemic data falsification took place at no less than four Japanese production sites and appears to have affected virtually every product made by the company: the scandal has spread to the manufacturer's mainstay steel business, with revelations Friday that steel wire was also shipped without inspection or with faked certificates. Meanwhile, the number of affected customers has swelled from around 200 to roughly 500.
One can only imagine the "honesty", measured in alpha, beta and gamma radiation, if Kobe was also behind the Tepco nuclear disaster, where of course as we leaned over the past 6 years, the amount of data fabrication was just as unprecedented. It is almost as if there is something rather rotten with Japan's entrenched, corporate ways...
But not to worry: in an amusing twist, Kobe Steel has promised it will complete safety inspections for already shipped products in two weeks or so. A report on the causes of the fraud and measures to prevent a recurrence will come out in a month or so; we can't wait to read the lies in that one. The steelmaker is conducting a groupwide probe that includes interviews with former senior officials. Because if there is anything Kobe will be successful at, it is diligent, honest self-reporting.
Where the company is certainly lying however, is when it told analysts earlier on Monday that "liquidity is not an issue" according to Bloomberg. Judging by the explosion in Kobe Steel CDS in recent days...
... one more gaffe by the scandal-plagued company, and Kobe Steel will be insolvent. As for all those who are considering providing liquidity to this fraud of a company, good luck with lying to yourselves that you will ever see any of that money back.
https://economictimes.indiatimes.co...bullet-train-project/articleshow/61054718.cms
Japanese steel scandal could derail Modi's bullet train project
Bloomberg|
Oct 12, 2017, 08.16 PM IST
0Comments
Central Japan Railway Co, which operates bullet trains between Tokyo and Osaka, said aluminum components connecting wheels to train cars failed Japanese industry standards
By Kiyotaka Matsuda and Masumi Suga
Kobe Steel Ltd.’s fake data scandal penetrated deeper into the most hallowed corners of Japanese industry as iconic bullet trains were found with sub-standard parts supplied by the steelmaker.
While there’s no safety risk, two companies operating the high-speed Shinkansen trains said they found Kobe Steel components that failed to meet Japanese industry standards. The chief executive officer of the 112-year old steelmaker apologized for the crisis as compromised materials turn up in everything from cars to DVDs. The affair has wiped off more than a third of the company’s market value and led to speculation it may be broken up.
The latest scandal to hit Japanese manufacturing erupted Sunday after the country’s third-largest steelmaker admitted it faked data about the strength and durability of some aluminium and copper. As clients from Toyota Motor Corp. to General Motors Co. scrambled to determine if they used the suspect materials and whether safety was compromised in their cars, trains and planes, the company said two more products were affected and further cases could come to light. There have been no reports of products being recalled or safety concerns raised.
“I deeply apologize for causing concern to many people, including all users and consumers,” Kobe Steel Chief Executive Officer Hiroya Kawasaki said at a meeting with a senior government official on Thursday. He said trust in the company has fallen to “zero” and he will work to restore its reputation. “Safety is the top priority.”
Shares in the company rebounded 0.5 percent Thursday, after plunging 36 percent over the previous two days. About $1.6 billion of Kobe Steel’s market value has been wiped out since the revelations were made.
While shares collapsed, bond risk has spiked. Five-year credit-default swaps insuring the company’s debt against default have jumped 222 basis points to 279, the highest since February 2016, according to data from CMA.
Figures were systematically fabricated at all four of Kobe Steel’s local aluminium plants, with the practice dating back as long as 10 years for some products, the company said Sunday. Data was also faked for iron ore powder and target materials that are used in DVDs and LCD screens, it said three days later.
Central Japan Railway Co, which operates bullet trains between Tokyo and Osaka, said aluminium components connecting wheels to train cars failed Japanese industry standards. Of the tested parts, 310 were found to be sub-standard and will be replaced at the next regular inspection, spokesman Haruhiko Tomikubo said. They were produced by Kobe Steel over the past five years, he said. West Japan Railway Co, which runs services from Osaka to Fukuoka, also found sub-standard parts made by Kobe Steel.
Investigations have been completed on about 100 of 200 companies to which Kobe Steel supplied the affected products, Kawasaki said. The company plans to release the findings of safety checks for the products in about two weeks, and the causes of the issue and planned countermeasures within a month.
The company supplies nearly 60 percent of the aluminium disc blanks used in the world’s hard drives with production centres in Japan and Malaysia, according to its latest annual report. Kobe Steel is one of only two major suppliers for the market and that means -- at the very worst -- hard drive failures could increase, according to Bloomberg Intelligence analyst Simon Chan.
While there have not been any reports that Kobe Steel products posed safety risks, the company is likely to face lawsuits from investors, customers, consumers and regulators in Japan and U.S., experts say. Deputy Chief Cabinet Secretary Kotaro Nogami on Wednesday said the faked data undermined the basis of fair trade, calling it “inappropriate.”
If lenders were to take over Kobe Steel, a break-up of the company along business lines could be beneficial for shareholders and rivals, according to Thanh Ha Pham, an analyst at Jefferies Japan Ltd., who has a “Buy” rating for the company. Kobe’s steel business would fetch roughly 200 billion yen ($1.78 billion), he said.
Japan’s steel industry is dominated by JFE Holdings Inc. and Nippon Steel & Sumitomo Metal Corp., which accounted for about 70 percent of the country’s production in the year ended March.
“I talked with management of JFE and I think they are very happy to buy Kobe Steel’s steel businesses,” Pham said Thursday on Bloomberg TV. “That would be a very good scenario, to have further restructuring in the steel industry in Japan.”
JFE said it isn’t actively considering purchasing Kobe Steel’s steel business.
Kobe Steel Scam Hits Planes, Trains, Automobiles
By
Masumi Suga
and
Chikako Mogi
October 13, 2017, 7:41 AM EDT
From
Venable's Strickland on Kobe Steel Scandal's Safety Risks
Kobe Steel Ltd. has made a startling admission: It sold products that failed quality control tests to about 500 companies. Worse still, it did so not in error but by falsifying data to make it appear that items had made the grade. Aircraft, electronics, car and bullet train manufacturers were among the recipients, raising obvious safety concerns. From Boeing Co. to Ford Motor Co., companies are scrambling to check any affected products. And Japan Inc. is facing up to another embarrassing scandal.
1. What exactly did Kobe Steel falsify?
The admissions have dribbled out, and more may follow. Initially, the company confessed to falsifying data about the strength and durability of some copper and aluminum that was used in cars and trains and possibly planes and a space rocket, too. Then Kobe Steel said it also faked data about iron ore powder and materials used in DVDs and LCD screens. Chief Executive Officer Hiroya Kawasaki said on Oct. 12 more cases could emerge as the company continues its investigations. A day later it flagged misconduct related to more items including steel wire and copper piping, some of which were produced overseas.
2. So this was no one-off?
Hardly. The fabrication of data relating to aluminum was found at all four of Kobe Steel’s local plants in conduct the company described as “systematic.” For some items, the practice dated back some 10 years, according to Kobe Steel Executive Vice President Naoto Umehara. The dodgy materials used in bullet trains were supplied over the past five years, according to one customer. Details of how the deception unfolded have yet to fully emerge but the company has said it’ll release the findings of safety checks for the products in about two weeks, and the causes of the issue and planned countermeasures within a month.
3. Which companies were affected?
A who’s who of the transport industry. There are carmakers such as Toyota Motor Corp. and Honda Motor Co.; they used the suspect materials in hoods and doors. There’s Boeing, which is examining parts it gets from Kobe Steel customer Subaru Corp. Hitachi Ltd. said trains it has exported to the U.K. contained compromised metal as well as bullet trains in Japan. Central Japan Railway Co., which runs the iconic trains between Tokyo and Osaka, said two types of aluminum parts used to connect cars to wheels fell short in quality tests. West Japan Railway Co. also found sub-standard parts. Ford said it used aluminum from the company in its Mondeo car hoods in China, although it hasn’t confirmed whether the parts were compromised. As yet, no company has flagged any serious safety concern as a result of the compromised products.
4. What is the company doing?
CEO Kawasaki is leading a committee to probe the quality issues. He has run Kobe Steel since 2013, overseeing moves to expand the No. 3 Japanese steelmaker’s presence in aluminum. “I deeply apologize for causing concern to many people, including all users and consumers,” Kawasaki said Oct. 12. Kobe Steel is likely to face lawsuits from investors, customers, consumers and regulators in Japan and U.S., experts say.
5. What’s the market’s verdict?
Shares in Kobe Steel have plunged 42 percent since its initial mea culpa, wiping out $1.8 billion of market value. “This is not going to be the end of Kobe Steel, it could be the end for management,” said Thanh Ha Pham, an analyst at Jefferies Japan Ltd. “It could result in the break-up of the company.” The cost to protect Kobe Steel’s bonds against non-payment rose nearly 250 basis points in the week after the revelations, the highest in 20 months, as investors raced to reduce or hedge their exposure.
6. More bad publicity for Japan’s manufacturers?
Japan Deputy Chief Cabinet Secretary Kotaro Nogami has said the faked data undermined the basis of fair trade, calling it “inappropriate”. It’s another scandal that threatens to undermine confidence in Japanese manufacturing. Shinko Wire Co., a Kobe Steel affiliate, in 2016 said a unit had misstated data on stainless steel wires and that it had supplied customers with alloy that failed to meet Japanese standards. Takata Corp. pleaded guilty in the U.S. in February to one count of wire fraud for misleading automakers about the safety of its exploding air bags. Toyo Tire & Rubber Co. officials were referred to prosecutors in March after the company admitted falsifying data on rubber for earthquake-proofing buildings in 2015. And Nissan recalled more than 1 million cars in Japan in October.
The Reference Shelf
- The scandal spreads to Kobe Steel’s core business.
- Why Japanese manufacturers are under pressure.
- How Kobe responds is key, says corporate governance pros.
- Kobe is likely to see a rush of lawsuits over fake data.
- How Japan Inc.’s image got shredded.
- Here’s Kobe Steel’s supply chain.
- Bloomberg Gadfly’s David Fickling says the cascading effects of another Japanese industrial scandal could be far-reaching.
- Bloomberg Vie
http://www.zerohedge.com/news/2017-...r-company-faked-data-decades-had-fraud-manual
Kobe Steel Scandal Goes Nuclear: Company Faked Data For Decades, Had A "Fraud Manual"
by Tyler Durden
Oct 16, 2017 8:00 PM
Last week we reported that in the latest instance of criminal Japanese corporate malfeasance, Japan's third-biggest steel producer admitted falsifying data about the quality of steel, aluminum, copper, iron powder and other products it sold to customers across virtually every single industry. The news sent the company's stock tumbling 43% from levels before the scandal broke, to the lowest price since 2012.
The downstream impact was quickly felt, with selling hitting names across the global supply chain...
... while the NYT reported that the fallout has the potential to spread to hundreds of companies. As of a week ago, the extent of the problems at Kobe Steel was still unfolding, and prompte the Nikkei newspaper to conclude that "the falsification problem has become an issue that could destroy international faith in Japanese manufacturing."
Well, as of moments ago that tipping point was this much closer, when the same Nikkei reported that some Kobe Steel plants in Japan had been falsifying product quality data for decades, well beyond the roughly 10-year time frame given by the lying steelmaker. According to the Japanese newspaper, "employees involved in the data manipulation used the industry term tokusai to refer to shipping of products that did not meet the standards requested by customers", the Nikkei source said. Though tokusai usually refers to voluntary acceptance of such products, plants sometimes sent substandard goods without customers' consent. The word was apparently in use at some plants for 40 to 50 years.
But wait, it gets better.
Not only did the company, having already been caught, lie to shareholders and rule-abiding employees how long this illegal behavior had been going on, but - in a glaring example of corporate idiocy - had effectively enshrined and codified its fraudulent ways, as the cheating procedures eventually became institutionalized in what was essentially a tacit fraud manual, allowing the practice to continue as managers came and went.
Meanwhile, the Nikkei also reports that everyone could have been in on it, as data manipulation may have occurred with the knowledge of plant foremen and quality control managers. Some shipments even came with forged inspection certificates.
Kobe Steel has tapped senior officials in the aluminum and copper business - where most of the misconduct took place - to serve on its board. How far up the chain of command knowledge of the fraud may have extended in the past remains an open question.
According to the latest update, systemic data falsification took place at no less than four Japanese production sites and appears to have affected virtually every product made by the company: the scandal has spread to the manufacturer's mainstay steel business, with revelations Friday that steel wire was also shipped without inspection or with faked certificates. Meanwhile, the number of affected customers has swelled from around 200 to roughly 500.
One can only imagine the "honesty", measured in alpha, beta and gamma radiation, if Kobe was also behind the Tepco nuclear disaster, where of course as we leaned over the past 6 years, the amount of data fabrication was just as unprecedented. It is almost as if there is something rather rotten with Japan's entrenched, corporate ways...
But not to worry: in an amusing twist, Kobe Steel has promised it will complete safety inspections for already shipped products in two weeks or so. A report on the causes of the fraud and measures to prevent a recurrence will come out in a month or so; we can't wait to read the lies in that one. The steelmaker is conducting a groupwide probe that includes interviews with former senior officials. Because if there is anything Kobe will be successful at, it is diligent, honest self-reporting.
Where the company is certainly lying however, is when it told analysts earlier on Monday that "liquidity is not an issue" according to Bloomberg. Judging by the explosion in Kobe Steel CDS in recent days...
... one more gaffe by the scandal-plagued company, and Kobe Steel will be insolvent. As for all those who are considering providing liquidity to this fraud of a company, good luck with lying to yourselves that you will ever see any of that money back.
https://economictimes.indiatimes.co...bullet-train-project/articleshow/61054718.cms
Japanese steel scandal could derail Modi's bullet train project
Bloomberg|
Oct 12, 2017, 08.16 PM IST
0Comments
Central Japan Railway Co, which operates bullet trains between Tokyo and Osaka, said aluminum components connecting wheels to train cars failed Japanese industry standards
By Kiyotaka Matsuda and Masumi Suga
Kobe Steel Ltd.’s fake data scandal penetrated deeper into the most hallowed corners of Japanese industry as iconic bullet trains were found with sub-standard parts supplied by the steelmaker.
While there’s no safety risk, two companies operating the high-speed Shinkansen trains said they found Kobe Steel components that failed to meet Japanese industry standards. The chief executive officer of the 112-year old steelmaker apologized for the crisis as compromised materials turn up in everything from cars to DVDs. The affair has wiped off more than a third of the company’s market value and led to speculation it may be broken up.
The latest scandal to hit Japanese manufacturing erupted Sunday after the country’s third-largest steelmaker admitted it faked data about the strength and durability of some aluminium and copper. As clients from Toyota Motor Corp. to General Motors Co. scrambled to determine if they used the suspect materials and whether safety was compromised in their cars, trains and planes, the company said two more products were affected and further cases could come to light. There have been no reports of products being recalled or safety concerns raised.
“I deeply apologize for causing concern to many people, including all users and consumers,” Kobe Steel Chief Executive Officer Hiroya Kawasaki said at a meeting with a senior government official on Thursday. He said trust in the company has fallen to “zero” and he will work to restore its reputation. “Safety is the top priority.”
Shares in the company rebounded 0.5 percent Thursday, after plunging 36 percent over the previous two days. About $1.6 billion of Kobe Steel’s market value has been wiped out since the revelations were made.
While shares collapsed, bond risk has spiked. Five-year credit-default swaps insuring the company’s debt against default have jumped 222 basis points to 279, the highest since February 2016, according to data from CMA.
Figures were systematically fabricated at all four of Kobe Steel’s local aluminium plants, with the practice dating back as long as 10 years for some products, the company said Sunday. Data was also faked for iron ore powder and target materials that are used in DVDs and LCD screens, it said three days later.
Central Japan Railway Co, which operates bullet trains between Tokyo and Osaka, said aluminium components connecting wheels to train cars failed Japanese industry standards. Of the tested parts, 310 were found to be sub-standard and will be replaced at the next regular inspection, spokesman Haruhiko Tomikubo said. They were produced by Kobe Steel over the past five years, he said. West Japan Railway Co, which runs services from Osaka to Fukuoka, also found sub-standard parts made by Kobe Steel.
Investigations have been completed on about 100 of 200 companies to which Kobe Steel supplied the affected products, Kawasaki said. The company plans to release the findings of safety checks for the products in about two weeks, and the causes of the issue and planned countermeasures within a month.
The company supplies nearly 60 percent of the aluminium disc blanks used in the world’s hard drives with production centres in Japan and Malaysia, according to its latest annual report. Kobe Steel is one of only two major suppliers for the market and that means -- at the very worst -- hard drive failures could increase, according to Bloomberg Intelligence analyst Simon Chan.
While there have not been any reports that Kobe Steel products posed safety risks, the company is likely to face lawsuits from investors, customers, consumers and regulators in Japan and U.S., experts say. Deputy Chief Cabinet Secretary Kotaro Nogami on Wednesday said the faked data undermined the basis of fair trade, calling it “inappropriate.”
If lenders were to take over Kobe Steel, a break-up of the company along business lines could be beneficial for shareholders and rivals, according to Thanh Ha Pham, an analyst at Jefferies Japan Ltd., who has a “Buy” rating for the company. Kobe’s steel business would fetch roughly 200 billion yen ($1.78 billion), he said.
Japan’s steel industry is dominated by JFE Holdings Inc. and Nippon Steel & Sumitomo Metal Corp., which accounted for about 70 percent of the country’s production in the year ended March.
“I talked with management of JFE and I think they are very happy to buy Kobe Steel’s steel businesses,” Pham said Thursday on Bloomberg TV. “That would be a very good scenario, to have further restructuring in the steel industry in Japan.”
JFE said it isn’t actively considering purchasing Kobe Steel’s steel business.
