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Editorial: Kobe Steel's data fabrication scandal more than domestic business issue

The recent announcement of data fabrication by Japanese steel giant Kobe Steel Ltd. could undermine global confidence in the country's manufacturing industry. Its impact on the industrial community is immeasurable.

Kobe Steel said the firm systematically fabricated inspection data on the strength and measurements of aluminum and copper products. Data falsification was found in the firm's core iron and steel businesses as well as in the operations of group companies, and it has been learned that products with fabricated data were shipped to some 500 firms, creating a ceaseless, negative ripple effect.

The seriousness of the scandal is reflected in its spread overseas. Foreign automakers including American auto giant General Motors Co. and major aircraft manufacturers have launched probes into the effects of Kobe Steel's misconduct.

Data fabrication was found in a total of roughly 20,000 metric tons of aluminum and copper products manufactured at four domestic plants over a period of one year up until August this year. These products were used in a wide variety of items, such as car doors, parts for H-IIA rockets and Japan's Mitsubishi Regional Jet aircraft, as well as defense equipment used by the Self-Defense Forces.

The scandal will not simply end with damage to the reputation of a single company; it has displayed how large a problem can become when it hits a global industry.

The expanding scandal has also highlighted the fact that the problem pervades Kobe Steel as a whole as it has been additionally confirmed that at least one of its group companies was involved in misconduct including data fabrication regarding nine product lines in China and other overseas plants.

Kobe Steel rewrote inspection certificates when shipping aluminum and copper products, making it appear as if they met specifications agreed upon in contracts with its clients. The firm also pretended in its data that it had carried out an adequate number of inspections.

Several dozen plant workers, including those in managerial positions, were involved in the data fabrication and silent approval was given to the practice. Officials said it had been going on for at least 10 years. This is a clear compliance violation and a malicious act. Kobe Steel should fully cooperate with its clients in inspecting the safety of the products it shipped. The company is unlikely to be able to escape the responsibility of covering the cost of such inspections.

At the same time, it is necessary to determine the reason why the systematic irregularities went overlooked.

With regard to the aluminum and copper data fabrication, Kobe Steel says its workers were concerned about delivery deadlines. The firm had recognized those business areas were keys to its growth. Was it not a distorted path of business expansion that caused this wrongdoing?

In June last year, another case of improper data handling was discovered in a Kobe Steel group company, and before that, the firm was hit with a series of scandals, including data fabrication in soot emissions. Kobe Steel cannot evade allegations that it places profit before compliance.

Kobe Steel has set up an investigative committee. Looking into the issue from a third-party perspective, the firm should dig deep into problematic practices and clarify the responsibilities of company management.

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