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US Justice Department seeking information on Kobe Steel's faked data
[TOKYO] Kobe Steel Ltd has received a request from the US Department of Justice (DOJ) for documents related to falsified product data. The company said it will cooperate with the US investigation and that it can't yet quantify the impact of the scandal on its earnings.
The DOJ's request marks an escalation in a crisis that risks engulfing Japan's third-biggest steelmaker, whose products are used by US car giants such as Ford Motor Co and General Motors Co and the nation's biggest planemaker, Boeing Co. Kobe has said some 500 companies worldwide are in a supply chain tainted by admissions that it faked certifications on the strength and durability of metals gong back to 2007.
Kobe's investigation into falsified data will probably reveal the practice began before then, according to a company executive. As the steelmaker works to contain the fallout from the crisis, it has briefed analysts that short-term liquidity isn't an issue as it seeks to generate cash including via asset sales.
Kobe's global review of its units is likely to show further instances of data falsification, the executive said, asking not to be named as the information isn't public. The Nikkei newspaper reported on Tuesday that irregularities over quality control at Kobe's plants in Japan date back decades, citing a person it didn't identify.
Kobe Steel is also considering the sale of its real estate unit, the executive said. Jefferies Japan Ltd analyst Thanh Ha Pham said that, while the company has enough cash and funding to cover short-term needs, it's looking to raise money by lowering working capital and through asset sales, according to a note that followed a briefing with Kobe's management on Monday.
Last week saw Kobe's stock collapse 41 per cent as investors rushed to punish the latest instance of corporate malfeasance in Japan, following similar misconduct around data at companies such as Mitsubishi Motors Corp and Asahi Kasei Corp. It has since pared those losses, closing 3.1 per cent higher in Tokyo on Tuesday for a two-day gain of 6 per cent.
Kobe Steel could face losses of as much as 200 billion yen (S$2.4 billion) in a worst-case scenario arising from its misconduct, according to Nomura Securities Co, while the Japan Credit Rating Agency has placed the company's A rating on watch for a possible downgrade.
Nomura's tally assumes customers would be forced to recall products and then have Kobe assume the cost, and that it will have to pay compensation, including to investors, credit analyst Shintaro Niimura said in a report on Monday. The bank estimates that about 30 per cent of Kobe's aluminium and copper, two of the metals subject to data falsification, is bought by carmakers.