National / World

Japanese steel scandal could derail Modi's bullet train project


Tokyo, Oct 13 (ET): Kobe Steel Ltd.’s fake data scandal penetrated deeper into the most hallowed corners of Japanese industry as iconic bullet trains were found with sub-standard parts supplied by the steelmaker.

While there’s no safety risk, two companies operating the high-speed Shinkansen trains said they found Kobe Steel components that failed to meet Japanese industry standards. The chief executive officer of the 112-year old steelmaker apologized for the crisis as compromised materials turn up in everything from cars to DVDs. The affair has wiped off more than a third of the company’s market value and led to speculation it may be broken up.

The latest scandal to hit Japanese manufacturing erupted Sunday after the country’s third-largest steelmaker admitted it faked data about the strength and durability of some aluminium and copper. As clients from Toyota Motor Corp. to General Motors Co. scrambled to determine if they used the suspect materials and whether safety was compromised in their cars, trains and planes, the company said two more products were affected and further cases could come to light. There have been no reports of products being recalled or safety concerns raised.

“I deeply apologize for causing concern to many people, including all users and consumers,” Kobe Steel Chief Executive Officer Hiroya Kawasaki said at a meeting with a senior government official on Thursday. He said trust in the company has fallen to “zero” and he will work to restore its reputation. “Safety is the top priority.”

Shares in the company rebounded 0.5 percent Thursday, after plunging 36 percent over the previous two days. About $1.6 billion of Kobe Steel’s market value has been wiped out since the revelations were made.

While shares collapsed, bond risk has spiked. Five-year credit-default swaps insuring the company’s debt against default have jumped 222 basis points to 279, the highest since February 2016, according to data from CMA.

Figures were systematically fabricated at all four of Kobe Steel’s local aluminium plants, with the practice dating back as long as 10 years for some products, the company said Sunday. Data was also faked for iron ore powder and target materials that are used in DVDs and LCD screens, it said three days later.

Central Japan Railway Co, which operates bullet trains between Tokyo and Osaka, said aluminium components connecting wheels to train cars failed Japanese industry standards. Of the tested parts, 310 were found to be sub-standard and will be replaced at the next regular inspection, spokesman Haruhiko Tomikubo said. They were produced by Kobe Steel over the past five years, he said. West Japan Railway Co, which runs services from Osaka to Fukuoka, also found sub-standard parts made by Kobe Steel.

Investigations have been completed on about 100 of 200 companies to which Kobe Steel supplied the affected products, Kawasaki said. The company plans to release the findings of safety checks for the products in about two weeks, and the causes of the issue and planned countermeasures within a month.

The company supplies nearly 60 percent of the aluminium disc blanks used in the world’s hard drives with production centres in Japan and Malaysia, according to its latest annual report. Kobe Steel is one of only two major suppliers for the market and that means -- at the very worst -- hard drive failures could increase, according to Bloomberg Intelligence analyst Simon Chan.

While there have not been any reports that Kobe Steel products posed safety risks, the company is likely to face lawsuits from investors, customers, consumers and regulators in Japan and U.S., experts say. Deputy Chief Cabinet Secretary Kotaro Nogami on Wednesday said the faked data undermined the basis of fair trade, calling it “inappropriate.”

If lenders were to take over Kobe Steel, a break-up of the company along business lines could be beneficial for shareholders and rivals, according to Thanh Ha Pham, an analyst at Jefferies Japan Ltd., who has a “Buy” rating for the company. Kobe’s steel business would fetch roughly 200 billion yen ($1.78 billion), he said.

Japan’s steel industry is dominated by JFE Holdings Inc. and Nippon Steel & Sumitomo Metal Corp., which accounted for about 70 percent of the country’s production in the year ended March.

“I talked with management of JFE and I think they are very happy to buy Kobe Steel’s steel businesses,” Pham said Thursday on Bloomberg TV. “That would be a very good scenario, to have further restructuring in the steel industry in Japan.”

JFE said it isn’t actively considering purchasing Kobe Steel’s steel business.

Comment on this article

  • Swamy, Mangalore

    Fri, Oct 13 2017

    By god's mercy a major disaster has been averted before hand from these Partners-In -Crime. This is the hidden story of much hyped BJP's Bullet Train by killing 3 birds in one stone and would have cost India dearly.

    DisAgree Agree [4] Reply Report Abuse

  • Deva, Pilar

    Fri, Oct 13 2017

    We will built our own Royal Bullet Train in India with Indian steel if con......comes to power in 2019...Jai,Hooo

    DisAgree [1] Agree [3] Reply Report Abuse

  • JK, Udupi

    Fri, Oct 13 2017

    Modi haters are trying their best to derail Modi by using fake news.. Hahahahaha....

    DisAgree [22] Agree [6] Reply Report Abuse

  • David Pais, Mangalore

    Fri, Oct 13 2017

    ab ki baar modi's derail sarkar.

    DisAgree [2] Agree [23] Reply Report Abuse

  • Amith, USA

    Fri, Oct 13 2017

    Chor ka Dosti Chor se, Feku ka Dosti Fake Kaam se!!! Weldone Bakhts! Keep it up!! Skelton start Falling from Feku's cupboard!!!!

    DisAgree [2] Agree [26] Reply Report Abuse

  • SMR, Karkala

    Fri, Oct 13 2017

    Bellary republic Reddy mafia looted iron ore from Karnataka to China and filled the coffers of BJP and sponsored the debut BJP government in Karnataka.
    Now PM Modi's ambitious bullet train is getting 'Made in Japan' steel parts is getting imported.
    PM Modi's corporates friends in steel business are exporting worldwide and his government is importing it to India.
    India could have saved as much as $3.2 billion on construction of the Mumbai-Ahmedabad bullet train system if it had invited bids instead of awarding the project to Japan on a nomination basis. At least, that is what emerges from a cost comparison with similar high-speed rail (HSR) projects built in other countries in recent years.
    Thailand approved a 5.5 billion US dollar high-speed railway project to link Bangkok with China and gave the order to China in July. Now, there is a comparison between the cost of this project and the bullet train project between Ahmedabad and Mumbai to be built by Japan.
    "Thailand approves 3000 KM Chinese bullet train from Bangkok to China for $5.5B. India approves 500KM train for $17B!"
    Rs 1.10 lakh crore. That's too many zeros, many feel now. But for PM Modi & his party BJP it is an prestigious issue even though the trains operating are not safe and not running in time.
    South Korea’s Seoul-Busan HSR caters to almost 70% of the population, yet struggles with viability. France’s fabled Paris-Lyon HSR service has had to periodically receive substantial subsidies. Taiwan’s $14 billion HSR service between Taipei and Tainan virtually became bankrupt after losses of over $1 billion. It realised only 50% of the projected ridership and required government bailout. Argentina gave up on HSR ambitions on cost grounds, deciding instead to upgrade its entire railway system to medium-speed infrastructure, an option India should seriously consider. Even the U.S. is tentatively initiating a San Francisco-Los Angeles corridor, and is still unsure.
    Jai Hind

    DisAgree [3] Agree [21] Reply Report Abuse

  • Mahi, Mangalore

    Fri, Oct 13 2017

    The distance is not correct and later Prashant Bhushan apologized for his tweet. And this false news was spread by all sickulars...

    DisAgree [13] Agree [8] Reply Report Abuse

  • sri_elder, Karkala

    Fri, Oct 13 2017

    First high speed train should run and then you can build your own technology for konkan railways

    DisAgree [8] Agree [4] Reply Report Abuse

  • Mahesh, Uppala

    Fri, Oct 13 2017

    The bullet train work is yet to start in India and Japan has the responsibility to maintain the quality as per the agreement. It is good that the scandal has come out before the start so that they can change the supplier and get quality steel. But why some sickulars have field days when something bad happens to India ?

    DisAgree [13] Agree [8] Reply Report Abuse

  • Santan Mascarenhas, Kinnigoli/Mumbai

    Fri, Oct 13 2017

    Faulty parts have also been found in Japan's famous bullet trains that run at speeds as high as around 300 kilometres (180 miles) per hour and a space rocket that was launched in Japan earlier this week. One bullet train operator has already said it will seek compensation from Kobe Steel. (Economic times)

    At least now we have to think over the trains that run at the speed of bullet.

    DisAgree Agree [18] Reply Report Abuse

  • Vantage Point, mangalore

    Fri, Oct 13 2017

    Feku is having "Midas touch" ...

    DisAgree [5] Agree [17] Reply Report Abuse

  • RUTHVICK SHETTY, kundapur

    Fri, Oct 13 2017

    Dear Modi haters blaming every incident happen in world will not help you anything,Yes we will proudly saying that we are bhakth of our PM but we are not slaves of italy .We shown in (2014) we also again will prove in 2019 also

    Think and try to maintain at least that 44 seats

    DisAgree [24] Agree [12] Reply Report Abuse

  • Jenifer, Mangalore

    Fri, Oct 13 2017

    What else is left now than seeking 'sympathy' ??

    DisAgree [4] Agree [20] Reply Report Abuse

  • Mark Dcruz, Mangalore

    Fri, Oct 13 2017

    Please tell me how you have been benefited from Modi or Bjp?
    Have you received fire crackers for Diwali from Bjp as gift?

    DisAgree [2] Agree [15] Reply Report Abuse

  • Af,,, Mangalore

    Fri, Oct 13 2017

    Percentage of votes will defently come down in gujarat .

    DisAgree [5] Agree [24] Reply Report Abuse

  • Jenifer, Mangalore

    Fri, Oct 13 2017

    Rate asli steel ka hi lagaaya tha naa ?? Waise... FM kaun thaa ? Vakeel Babu ? RBI governor Patel Babu ?

    DisAgree [1] Agree [20] Reply Report Abuse

  • Jenifer, Mangalore

    Fri, Oct 13 2017

    Just three years and the 'pahaaad' of BJP's scandals keep getting higher in numbers !

    DisAgree [2] Agree [30] Reply Report Abuse

  • Vincent Rodrigues, Bengaluru/Katapadi

    Fri, Oct 13 2017

    FAKE HAS GET INTO THE LIFE LINE OF JAPAN TOO WHICH IS QUITE UNFORTUNATE

    DisAgree Agree [24] Reply Report Abuse

  • rolf, Dubai

    Fri, Oct 13 2017

    What about the statue of sardar vallaba . He was known as iron man. Now modije will get the statue done in china or Japan. To fool bahakath. Now people are changing sardar joke into bhakth joke.
    .

    DisAgree [2] Agree [26] Reply Report Abuse

  • Jenifer, Mangalore

    Fri, Oct 13 2017

    Every politician does something for his own benefit. Look at NaMo - he went to make history by bullet trains in India but gave it to Gujarat from Mumbai, not to Hyderabad, Chennai, Bangalore nor any other station.

    Had he been selfless, crores of Indians' prayers would have saved him from this embarrassment - he he he !

    DisAgree [2] Agree [25] Reply Report Abuse

  • Mark Dcruz, Mangalore

    Fri, Oct 13 2017

    Now Japanese also became Feku

    DisAgree [4] Agree [34] Reply Report Abuse

  • HENRY MISQUITH, Bahrain

    Fri, Oct 13 2017

    Jumla party's third disaster after GST & Demonetization .

    DisAgree [6] Agree [41] Reply Report Abuse

  • sri_elder, Karkala

    Fri, Oct 13 2017

    Hello this is the story from Japan..

    DisAgree [23] Agree [14] Reply Report Abuse

  • David Pais, Mangalore

    Fri, Oct 13 2017

    japan faku ke saath milke feku bangaya

    DisAgree [2] Agree [31] Reply Report Abuse

  • Rahul, Mangalore

    Fri, Oct 13 2017

    Yes dear scandal from Japan but requested from India to get maximum commission.
    Golmaal hai bhai sab golmaal hai.

    DisAgree [1] Agree [29] Report Abuse

  • Jenifer, Mangalore

    Fri, Oct 13 2017

    Oh really ? Did someone say its from India ? But, the customer is certainly INDIA, not Timbuktu !







    Did you guys not go ga ga over VVIP Choppers, its height adjustments made and flatly ascribed it to Congress ? Modi won the elections primarily because of this project. Whereas, the producer was Italy and deal was made by thenTyagis. Just because the head of Congress party was an Italian, did you guys not blurt out slur as if she ordered the choppers for her kitchen ?

    Will you guys now take the responsibility now for the derogated steel used for the bullet train thus being safety hazard to Indians ? Who will tell the people about it - will Modi ?

    Doston... maaf kijiye, maine achcha steel order kiyaa thaa, unhone kharaab steel bechcha ! - will he do this ?

    DisAgree [3] Agree [25] Reply Report Abuse

  • HENRY MISQUITH, Bahrain

    Fri, Oct 13 2017

    Japan ne feku ko ullu Banaya . Jaise ki feku ne 15 lac ka ullu hamein Banaya tha.

    DisAgree [1] Agree [38] Reply Report Abuse

  • Robert, Mangalore

    Fri, Oct 13 2017

    Wow !!!

    Andh Bahkt is in defensive mood now. who signed rupee loan BULLET train project with lots of promises, which now may impact the project costs and implementation.

    Be outfront, admit wrong is wrong. You have lost credibility.

    Modi took Japan PM month ago and signed agreements.

    DisAgree Agree [24] Reply Report Abuse

  • BH Balakrishna Pai, Mangaluru/Mumbai

    Fri, Oct 13 2017

    Your congress party which looted the country with scams is full of Jumla.You people are good at Jumla only

    DisAgree [25] Agree [3] Reply Report Abuse

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