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Japanese steel scandal grows as Kobe admits more cases of falsified information

Japanese steel scandal grows as Kobe admits more cases of falsified information”

SMBC Nikko Securities said in a note to clients that investors in Kobe Steel face a prolonged period of uncertainty.

Kobe Steel Ltd 5406.T plans to pay customers' costs related to the fabrication of data for its products, Chief Executive Hiroya Kawasaki told a news conference on Friday, but said the firm has not yet received any compensation requests.

Kobe Steel initially said 200 firms were affected when it admitted at the weekend it had falsified data about the quality of aluminium and copper products used in cars, aircraft, space rockets and defence equipment.

Mitsubishi Aircraft, a Mitsubishi Heavy subsidiary, said it uses Kobe Steel in the Mitsubishi regional Jet (MRJ), Japan's first passenger aircraft in half a century.

"Right now, our top priority is to find out the cause and take preventive measures, and to determine if our inadequate products affected our customers", he said.

The subsidiaries named on Friday included three in China, one each in Thailand and Malaysia and four based in Japan.

Employees at the companies are supposed to test the products to ensure that they meet design standards specified in customer contracts. Boeing's European rival, Airbus, announced that y did not buy product directly from Kobe, but that suppliers had been investigated.

Executives said the data manipulation was deliberate.

Kobe Steel has recorded net losses in the past two fiscal years, but Kawasaki said he did not believe the corner-cutting resulted from excess pressure from top management.

The corrosive business practices have raised broader questions over corporate governance in Japan, and cast doubt on the integrity of a manufacturing industry once the envy of the world.

The scandal touched Japan's embattled nuclear industry on Friday.

The pipes were delivered to its Fukushima Daini station, located near the destroyed Fukushima Daiichi plant, but have not been used, Tepco said, adding that it was checking all its facilities.

The exact extent of the problem remains unclear since Kobe Steel has not identified the customers affected. But it said the piping had never been installed, and was in storage, and did not pose a safety threat. Kobe company, copper-alloy pipes, molds, steel wire and rods, including 9 different products are presented in wrong data, he explained.

Earlier, the 112-year-old company reported it had discovered bogus inspections or faked data for steel powder, aluminum flat-rolled products and castings, copper strips and tubes and forgings.



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