Kobe Steel Ltd.’s investigations into faked product data will probably reveal that the practice began more than ten years ago, according to a company executive. As the company works to contain the fallout from the scandal, 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 business 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 company said last week that the oldest misconduct it has uncovered so far dates back to 2007. The Nikkei newspaper reported Tuesday that irregularities over quality control at Kobe Steel’s plants in Japan date back decades, citing a person it didn’t identify.

Japan’s third biggest steel-maker is also considering the sale of its real estate unit, the executive said. In a note, Jefferies Japan Ltd. analyst Thanh Ha Pham said the company had briefed analysts that, while it has enough cash and funding to cover its short-term needs, it’s looking to raise cash by lowering working capital and via asset sales.

The first week of the scandal saw Kobe’s stock collapse 41 percent 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 and was 4.5 percent higher in Tokyo by 9:42 a.m. in Tokyo.

The Kobe property unit, Shinko Real Estate Co., had fixed assets of 89.9 billion yen ($801 million), according to a March filing. The company is considering a number of sales options for the business, which leases and sells real estate, including a full divestment, according to the executive, although he said the sale isn’t linked to the company’s wider problems.

None of the 500 customers that may have been affected by the scandal has raised specific safety concerns or recalled products. Jefferies’ Pham cited the company as saying that customer feedback so far, including from beverage can producers and railway companies, is that no immediate recall is required and that products involved are not a safety concern.

Kobe Steel wasn’t immediately available to comment on the Jefferies report. A Kobe Steel spokeswoman, who asked not to be named due to policy, said the company is currently investigating past records to determine the cause of the falsifications. The units implicated in the crisis make the steel, copper, aluminum and other materials that account for over half the company’s revenue, and its customers span some of the largest auto, train and plane makers, including Ford Motor Co., Boeing Co. and Hitachi Ltd.

Source:
courtesy of BLOOMBERG

by Stephen Stapczynski

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