U.S. Steel announced in late September it planned to partner with Kobe Steel on a continuous galvanizing line in Ohio was supposed to be a joint venture with the troubled Japanese steelmaker to build a new $400 million finishing line for lightweight vehicles in northwest Ohio.
Within less than two weeks, Kobe Steel got swept up in a scandal after it admitted to falsifying data about the quality of some of its aluminum, copper, iron ore and steel products. The company estimates it has shipped substandard products to as many as 500 customers, including copper tube, wire, plane and bullet train makers.
"Causing this serious matter has brought overwhelming shame to the company," Kobe Steel said in a news release. "The company deeply regrets this incident and sincerely apologizes for the enormous worry and trouble this incident has caused to its customers and other related parties. The company will report again as further progress of the investigation is made."
U.S. Steel said it still plans to go forward with plans to build a new continuous galvanizing line for advanced high-strength steels for the automotive industry at the PRO-TEC Coating Co. subsidiary in Leipsic, Ohio.
"U.S. Steel remains committed to our new Advanced High Strength Steel CGL and bringing solutions to our customers," U.S. Steel spokeswoman Meghan Cox said Friday.
Cox did not specify whether the line would still be built as a joint venture.
Steel industry analyst Charles Bradford with New York City-based Bradford Research Inc. said the Kobe scandal was serious enough where it could threaten the Japanese company's very existence.
"They could be facing some very serious lawsuits," he said.
The Japanese steelmaker said it fabricated data for hundreds of thousands of tons of metal, including for many safety-sensitive customers such as automakers and passenger jet manufacturers. Kobe Steel President and CEO Hiroya Kawasaki said the company's credibility "has plunged to zero," according to Market Watch.
Kobe Steel said it has hired an outside law firm to conduct an investigation into how so many products were mislabeled.
"In view of the seriousness of the situation, Kobe Steel established the investigation committee on quality issues in response to the situation," the company said in a statement. "Based on the results of the outside law firm, Kobe Steel will conduct a thorough analysis of the causes and take company-wide measures to prevent recurrence. At this time, as a part of the company-wide measures to prevent recurrence."