Opinion: Kobe Steel – no longer ‘big in Japan’?

It’s a shame that the word ‘steel’ has to come into it, but it does, even if the problem involves ‘the miracle metal’ – aluminium – and copper. The fact remains that a steel company (Japan’s third biggest producer, Kobe Steel) has admitted it may have falsified data about the quality of its products. Why this has happened is anybody’s guess, but the admission has had dire consequences for the steelmaker as the products concerned have found their way into aircraft, cars and trains; and the bigger question now is whether or not safety has been compromised.

The question of ‘why’ is important because in the case of Kobe Steel the sorry outcome – $1.6 billion wiped off the company’s market value, shares plunging 18% in Tokyo – has surely negated the effort of falsifying the data in the first place. Wrongdoing, after all, is always uncovered – eventually.

The problem appears to be peculiarly Japanese with other ‘reputable’ companies (Takata Corp and Nissan) both implicated in similar misdemeanours. Nissan is to recall one million cars and Takata pleaded guilty to misleading carmakers over the safety of its airbags. Most worrying, however, is that whenever something like this raises its ugly head, the initial scandal proves to be just the tip of the iceberg.

For Kobe Steel there are potentially big costs involved, not to mention untold harm to the company’s reputation (which will linger for years); and, of course, there will be legal challenges too.

Toyota (a Kobe Steel customer) has described the situation as a ‘grave issue’ and rightly so; and whether Kobe Steel’s conduct is systemic remains to be seen, but either way, surely, the spotlight will now shine brightly on the company’s other products, namely its steel output.

Unauthorised inspectors, misleading automakers, a breach of compliance rules, falsified data – they’re all phrases that would spell trouble for any company and they have certainly put another phrase – ‘Made in Japan’ – on the naughty step.

While aluminium and copper account for just 20% of Kobe Steel’s output, what about steel? And even if steel is not affected by the scandal, the company’s deteriorating reputation will deter potential buyers not only from purchasing Kobe’s steel, but also from buying steel from other Japanese producers.