Kobelco scandal and national reputations

The Kobelco scandal risks Japanese manufacturing’s hard-earned reputation for unrivalled quality.

Whether we are talking about motor cars, consumer goods or construction machinery, there are national stereotypes about manufacturing that have more than a grain of truth to them. Of course there are exceptions, but there are generally good reasons why we think that Italian machines are beautiful but not necessarily the most reliable; American machines are heavy beasts and over-engineered; German machines are high-tech and expensive; Chinese machines are cheap.

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Japanese products are famed, of course, for their bullet-proof reliability. Nikon, Sony, Canon, Nintendo, Panasonic… the list goes on – all great brands. Top of the pile are Japan’s car manufacturers, with Toyota, Nissan and Honda leading the way.

With construction machinery too, brands like Komatsu, Hitachi, Kobelco and Tadano have proved themselves to be as good as anything on the market and probably more dependable.

Japanese manufacturers, who pioneered Kaizen, Six Sigma and continuous improvement, showed the world how to maximise quality and efficiency.

But other parts of the world have caught up, and the Koreans are overtaking. Samsung and LG are now more highly rated than Sony and Toshiba for televisions; Hyundai and Kia are a match for Honda and Toyota in automobiles; Doosan and Hyundai are running strong in construction machinery.

Japanese brands still retain a slightly higher cachet in many segments, but fashions change over time and the recent Kobe Steel quality scandal will dent the reputation not just of Kobe Steel itself and Kobelco, its construction machinery division, but the entire Japanese manufacturing industry.

The rest of the world held Japanese manufacturing on a pedestal, but many myths were shattered when in October Kobe Steel admitted to falsifying inspection data and certification documents. Approximately 500 customers received copper, aluminium and steel products between 2007 and 2017 with falsified certificates, including Toyota, Tesla, Airbus and Boeing.

A Reuters report recently quoted a retired Kobe Works employee saying: “The corporate culture was to look the other way even while you saw what was going on.”

For its part, Kobe Steel has apologised – both profusely and frequently – taking very opportunity to flagellate itself: “This serious matter has brought overwhelming shame to the company,” it admits. “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.”

While no one to whom I have spoken expects their Kobelco machine to break down or fall apart as a result of this scandal, it is understood that the undermining of the Kobe Steel and Kobelco brand might very well have an impact on residual values. It could also impact on Kobelco sales. Ethical consumers might prefer not to purchase a machine made by a company that is known to have lied and cheated on quality matters, preferring to opt instead for equally good machine from a company that has yet to be found out.

On the other hand, the Kobe Steel scandal seems to me to be several degrees less scandalous than the Volkswagen emissions scandal that was uncovered in 2015. At Volkswagen, the lying and the cheating appears to have taken place at a much higher level up the corporate organisation. At Kobe the scandal is one of incompetent management.  We know that Volkswagen is paying heavily for its crimes (a $2.8bn fine in the USA alone), but its sales appear to have suffered no long term damage. Consumers, it seems, mostly regard VW as little better or worse than its various competitors whose own self-certification procedures have emerged as not entirely without flaws.

The Volkswagen scandal has certainly accelerated the development of battery-powered cars and hastened the demise of diesel power. But it remains too soon to judge the long-term effect that it may have had on the image of German manufacturing as a whole. In the same way, the Kobe Steel scandal does Japan no favours, but I suspect that Japanese manufacturers are strong enough to recover.

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Steve Rhine

About Steve Rhine

Community Manager at MachineryZone USA - All latest construction news on MachineryZone Mag!