* Kobe Steel says losing customers because of scandal
* Says data cheating has spread to mainstream steel products
* Statutory standards violated - company
(Adds details, comments, property auction)
By Yuka Obayashi and Taiga Uranaka
TOKYO, Oct 21 (Reuters) - Kobe Steel Ltd sank
deeper into crisis on Friday as the embattled company said it
had lost some customers to competitors because of widespread
data falsification that had extended to its mainstream steel
Japan's third-largest steelmaker, which supplies the world's
top airline and automobile manufacturers, also said it had
violated statutory standards set by the industry ministry,
pushing the scandal beyond failure to meet specifications agreed
Until now, the 112-year-old company had said products it
sold with falsified data met safety and other standards but did
not meet contract specifications agreed with customers. It had
also said the problem was mainly with aluminium and copper
Kobe Steel has an extensive role in global supply chains -
the company produces engine valve springs found in half the
world's cars, according to its website.
Kobe Steel Executive Vice President Naoto Umehara said the
company had found a breach of industrial standards at its Hatano
copper plant southwest of Tokyo, along with a new case of
falsification of data at a unit that cuts and processes steel
"There has been also some impact on our business as we have
lost credibility,” Umehara told a news conference, citing cases
that the company lost orders and customers switched to its
competitors. "But we can’t quantify the impact at the moment."
He said the Hatano plant did not meet Japanese Industrial
Standards for quality management after it faked data on tensile
strength and other properties of copper and copper-alloy piping.
Kobe Steel has stopped shipping about 43 percent of copper
products from the plant over the problems with the statutory
standards, a company spokeswoman said.
Two certification companies said on Thursday they were
investigating whether the plant is in line with a global
standard on quality control.
They could suspend or cancel the "ISO9001" certification of
the plant if it doesn't meet the standard, which could affect
its business as many global buyers require suppliers to use the
Kobe Steel said it also found, as the result of a
whistleblower, that a plant in western Japan had been
"obstructing company’s voluntary inspection” by concealing data.
After getting a tip that workers at the Chofu plant failed
to report data falsification on aluminium extrusion products,
the company decided to set up a panel of outsiders, replacing an
in-house panel led by the company’s president.
The Ministry of Trade and Industry believes "the data
concealment by its employees has hurt the credibility of Kobe
Steel’s voluntary investigation," said Yasuji Komiyama, director
of the industry ministry’s metal industries division.
The ministry ordered the company on Friday to expedite its
probes and report results as soon as possible.
Kobe Steel previously said that it found widespread
falsification of data on the strength and durability of copper
and aluminium products sent to customers. The falsifications
stretch back for more than 10 years, a senior executive told
Reuters this week.
Global automakers, aircraft companies and other
manufacturers have scrambled to identify potential hazards in
their products because of the falsification, although four
Japanese carmakers said on Thursday they have found no safety
issues with aluminium parts supplied by Kobe Steel.
The company is now subject to a U.S. Justice Department
probe while checks continue at hundreds of its clients involved
in complex supply chains spanning the globe.
No safety problems have surfaced as Kobe Steel attempts to
confirm the extent of the data tampering. But in Europe,
aviation safety authorities earlier this week issued a directive
advising aircraft manufacturers to avoid using Kobe Steel
products if they can until checks are completed.
"We are worried about the U.S. Justice Department probe,"
said a source at one of the company's lenders. "The impact will
be very big if the DOJ seeks a criminal case against Kobe and
hits it with huge financial penalties."
The company has started selling assets to raise fund, on
Friday holding the first round of an auction to sell its most of
a property unit, sources told Reuters on Friday, a deal that
reportedly could raise over $400 million.
Kobe Steel's fate hangs in the balance while checks are
being carried out.
Kobe Steel shares fell 1.6 percent on Friday. They have
fallen nearly 40 percent since it revealed the problems on Oct.
8, wiping about $1.60 billion off its market value.
($1 = 113.2300 yen)
(Additional reporting by Aaron Sheldrick and Junko Fujita;
Editing by Raju Gopalakrishnan)
First Published: 2017-10-20 06:28:45
Updated 2017-10-20 18:18:49
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