A modern supply chain is a complicated thing. That car you drive might be made in the U.S.A., but — as we learned from the Takata airbag recall — the parts inside it, from raw elements to fully-assembled electronic systems, come from a tangled web of companies all over the world. Which is why it’s a big deal affecting consumers all over the world when one company’s parts turn out not to be at all what they were supposed to be.
The scandal concerns a Japanese company, Kobe Steel.
Kobe recently announced that for at least a year, it had shipped products to its customers that did not actually meet the agreed-upon strength and durability specifications.
“At this time,” tens of thousands of tons of aluminum and copper products shipped between Sept. 1, 2016 and Aug. 31, 2017 have been discovered that “do not comply” with the consumer agreements, the company said.
It’s not just that the metal had some kind of undiscovered defect in it, though. Workers inside the company apparently knew some of the metal wasn’t up to spec — but falsified their data.
“Data in inspection certifications had been improperly rewritten,” the company’s statement says, an issue that came to light “following self-inspections and emergency quality audits” of the products in question.
An executive for the company said that the fabrication was found in all four of the company’s Kobe-area plants, in conduct that was “systematic” and had been going on for up to a decade, Bloomberg reports.
Why it matters
Unless you’re a commodities investor, a manufacturer, or just a fan of industrial metals, you’ve probably never heard of Kobe Steel. Like other companies higher up on the supply chain, Kobe isn’t really in the business of selling finished products to consumers.
But it is in the business of selling materials and components to the more than 200 companies that use Kobe Steel in their products every day.
As Bloomberg points out, just about every major automaker in the country is on that list. General Motors and Ford are both Kobe customers, as are pretty much all of the Japanese automakers: Honda, Mazda, Mitsubishi, Nissan, Subaru, and Toyota are all on the list, among others.
When carmakers order metal of a certain type, durability, thickness, and composition, they do so because it’s going to serve a specific purpose in their vehicles. And all those companies now say they’re digging deep to find out what vehicles the faulty products went into, and trying to suss out what, if anything, needs to be done.
Toyota confirmed that it used Kobe Steel products in the hoods, rear doors, and other “peripheral” areas of some vehicles. Nissan and Honda also use Kobe products in the doors and hoods of their cars.
Kobe Steel products are also used directly or through partnerships in the manufacture of some Hitachi trains, certain Boeing jets, and even rockets used by Japan’s space agency.
So far, there are no known or identified safety issues with the products known to have their data faked.
“Verification and inspection to date have not recognized specific problems casting doubts on the safety of the nonconforming products,” Kobe said in its statement.
Taking it Seriously
In its announcement, Kobe Steel said that it has set up a committee to look into quality issues, being headed by company CEO Hiroya Kawasaki.
The company has also contracted an outside law firm to conduct its own investigation.
“Causing this serious matter has brought overwhelming shame to the Company,” Kobe Steel said in its statement. “The Company deeply regrets this incident and sincerely apologizes for the enormous worry and trouble this incident has caused to its customers and other related parties.”
Bloomberg notes that the company is likely to face a wave of lawsuits from its customer companies and regulatory bodies, both in Japan and in the U.S.