Kobe Steel plant at center of false-data scandal loses last quality badge

TOKYO (Reuters) - The Kobe Steel 5406.T plant at the center of a data-falsification scandal that has shaken supply chains around the world has been stripped of all its industrial quality certifications, the Japanese government said on Wednesday.

FILE PHOTO: Kobe Steel's logo is seen through a fence at a facility of Kakogawa Works in Kakogawa, Hyogo Prefecture, Japan, November 13, 2017. REUTERS/Kim Kyung-Hoon/File Photo

In another blow to the embattled steelmaker, the government-sanctioned seal on insulated copper tubing from Kobe’s Hatano plant, one of its main copper product plants, was revoked after an investigation by a certification firm into its quality controls, the Ministry of Economy, Trade and Industry said in a statement.

The plant southwest of Tokyo has also lost its ISO 9001 quality certification from the International Standards Organization (ISO), Japan Quality Assurance Organization said.

Earlier, the plant was stripped of its Japan Industrial Standards (JIS) seal for seamless copper pipe products used for air conditioning and refrigerators, as part of the fallout of one of Japan’s biggest industrial scandals.

Having the quality seals revoked means the company can no longer sell the products with the JIS label, potentially restricting the number of customers that want to buy them and reducing its sales.

“We aim to regain the JIS certification and recover trust from our customers as soon as possible by implementing measures to prevent future misconduct,” Kobe Steel said in a statement.

JIS-certified products account for about 40 percent of Hatano’s sales by weight, Kobe Steel said. Copper products made up about 7 percent of the company’s total sales in the year to March 2017.

Some customers have agreed to keep buying products made at Kobe’s Hatano plant without the JIS label after it was first stripped of its JIS certification, a Kobe Steel spokesman said.

But the plant may be forced to stop shipping some products if the ISO 9001 certification was among the conditions set out in contracts with customers, the spokesman said.

“There will be some impact on our business as we have lost credibility in our quality assurance system, but it is not clear how much impact we will face,” he said.

Industry experts said customers may switch suppliers or pick Kobe’s competitors for future orders although the short-term impact may be reduced by the limited availability of substitute products.

Three other Kobe Steel copper and aluminum plants involved in the data cheating had their ISO 9001 quality certifications suspended earlier this month for up to six months, according to Kobe Steel.

Japan’s third-largest steelmaker, which supplies producers of cars, planes, trains and other products across the world, said last month that about 500 of its customers had received products with falsified specifications.

Japanese manufacturing prowess has taken a hit in recent weeks due to the Kobe Steel scandal and news of improper final domestic inspection procedures at Nissan Motor 7201.T.

Nissan said earlier on Wednesday it had been informed that the ISO 9001 certification of its plants and those of affiliate Nissan Shatai 7222.T had been revoked for production of Japan-bound vehicles.

Kobe Steel has an extensive role in global supply chains.

It produces engine valve springs found in half the world’s cars, according to its website.

Kobe shares have plunged nearly a quarter since news of the data tampering in early October. They fell 4 percent on Wednesday, versus a 1.6 percent drop in the Nikkei 225 .225.

Reporting by Yuka Obayashi; Writing by Aaron Sheldrick; Editing by Chang-Ran Kim, Himani Sarkar and Hugh Lawson