Kobe Steel Falsified Quality Data for Metal Used in Cars

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Kobe Steel was founded in 1905 and has been a pillar of Japan's manufacturing sector.

"The credibility of Kobe Steel has plunged to zero".

Shares of US steelmakers jumped on Friday after Japan's Kobe Steel Ltd said the firm's data cheating may have spread beyond the country to affect about 500 companies, sparking global supply chain concerns. The official did not elaborate.

The steel maker faces a range of legal risks, including compensation sought by clients or their customers, penalties for violating unfair competition laws for false representation, shareholder lawsuits for the fall in the company's stock price and class lawsuits from overseas customers seeking punitive damages, a lawyer said.

The Ministry of Economy, Trade and Industry ordered Kobe Steel to report on the results of safety checks within about two weeks and the reasons for the tampering, along with prevention measures in under a month.

A Kobe Steel spokesman said that Japan Aeroforge is still making parts for Safran Landing Systems.

The scale of the misconduct at Japan's third-largest steelmaker pummelled its shares as investors, anxious about the financial impact and legal fallout, wiped about $1.8 billion off its market value this week.

The shares were up 0.9 percent by around 0424 GMT, compared with an 0.5 percent gain in the Nikkei 225. Five-year credit default swaps were at 57 basis points on October 5 and last traded at 305 basis points on Wednesday.

In July past year, however, Kobe Steel said it had begun mass production of titanium forged parts for A350 landing gear.

The affected products include aluminium found in Japan's iconic bullet trains as well as materials in high-speed trains in Britain, although it is not clear whether the scandal affected product safety.

As the company revealed tampering of more products, the crisis has rippled through supply chains across the world in a body blow to Japan's reputation as a high-quality manufacturing destination.

Kobe Steel, Japan's third-largest steelmaker, earlier this week hit the automotive industry with a bombshell when the company admitted that it falsified data about the integrity of some aluminum and copper products used to make cars, planes and trains.

Toyota has already said Kobe Steel supplied materials to one of its Japanese factories, which used them in hoods, rear doors and surrounding areas of certain vehicles. Conglomerate Toshiba Corp is still battling the fallout of a scandal over reporting inflated profits.

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