Kobe Steel Falsified Data About Aluminum Strength in Vehicles

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Oct. 11, 2017—Kobe Steel, which started manufacturing and selling aluminum extrusions in the U.S. in May, said its staff falsified data about the strength and durability of some aluminum and copper products used in cars, both Reuters and The Chicago Tribune reported.

Shares plunged 22 percent and the cost to insure Kobe Steel debt against default soared as customers including Toyota, Honda and Subaru said they had used materials that were subject to falsification.

One outside estimate put the potential cost of replacing the parts at about 15 billion yen ($133 million), but the damage to the company—in the form of both reputational harm or possible legal challenges—could be much greater.

"At the moment, the impact is unclear but if this leads to recalls, the cost would be huge," said Takeshi Irisawa, an analyst at Tachibana Securities Co. "There's a possibility that the company would have to shoulder the cost of a recall in addition to the cost for replacement."

Kobe Steel's admission raises fresh concern about the integrity of Japanese manufacturers.

Nissan last week said it would recall more than 1 million cars after regulators discovered unauthorized inspectors approved vehicle quality, while Takata Corp. pleaded guilty this year of misleading automakers about the safety of its air bags.

Kobe Steel said the products were delivered to more than 200 unidentified companies, with the falsification intended to make the metals look as if they met client quality standards.

Toyota said it has found Kobe Steel materials, for which the supplier falsified data, in hoods, doors and peripheral areas.

"We are rapidly working to identify which vehicle models might be subject to this situation and what components were used," Toyota spokesman Takashi Ogawa said. "We recognize that this breach of compliance principles on the part of a supplier is a grave issue."

Kobe Steel said it discovered the falsification in inspections on products shipped from September 2016 to August 2017, adding there haven't been any reports of safety issues.

The products account for 4 percent of shipments of aluminum and copper parts as well as castings and forgings.

Honda said it used falsified material from Kobe Steel in car doors and hoods while Mazda Motor Corp. confirmed it uses aluminum from the company.

Suzuki Motor Corp. and Mitsubishi Motors Corp. all said they are checking whether their vehicles are affected.

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