The recent scandal by Kobe Steel Group has thrown light into the matter that the company has been manipulating with its product data sheet regarding strength and durability of its aluminum and copper products.
Kobe Group, which is the third largest steel company in Japan, produces aluminum parts that are required in bullet train operations. These aluminum components connect the wheels of the train to its body.
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During inspection of their bullet trains, the Central Japan Railway Co. found out that the aluminum parts were of substandard quality and they needed to replace 310 of them, which were supplied in a span of five years. Soon the Western Japan Railway Co. too found substandard parts in seven bullet trains manufactured by Hitachi and Nippon Sharyo for them. The news of fraud was reported and it panicked other companies like Toyota and General Motors who are Kobe Steel’s clients and regularly purchased products made of aluminum for their production. In-turn Kobe panicked most of the industries dealing with automobiles, trains and planes — as they were worried if they had compromised on the safety of their products by using substandard quality Aluminum, and the news got international importance.
How it affected Kobe Steel
The CEO of Kobe Group came out and made open apologies on last Wednesday regarding the tampering of spec sheets and jeopardizing its clients over security, after which the company experienced steep fall in their share values. A third of their stock price was wiped away. Now the company is facing a financial crisis because of the loan it had taken from market against their higher share value earlier.
How does it affect Modi
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The much ambitious bullet train project helmed by Prime Minister Narendra Modi came under scanner when the news of Kobe Steel’s scandal broke out. It has become a cause of concern as the prestigious project, which rolled out on 14 September 2107, has poured in millions of dollars as investment towards first phase of development and this issue of safety, which was unforeseen earlier, sprouted!
Not a good time for rail related problems
Already the government is facing the people’s wrath now because of the recent rail tragedies and accidents; people are not sure the government will be able to handle this high-speed corridor, when they cannot handle the existing ordinary rail system in the country. At this hour when the citizens are concerned about the safety of the railways in general, the news about a major manufacturer supplying substandard parts for the bullet train project will cause frenzy!
Time consuming to make new agreements
The government will have to revoke contracts with fraudulent company and get a new player instead. All the formalities that were involved in choosing Kobe Group — directly or indirectly by the government — will go into finding and contracting the next one. This could prove to be a time consuming process. Even a small delay in the development of the project will cause considerable delay in its finish. It will increase the project cost many fold. Different agreements and contracts needs to be drawn with Japanese Government, as they are funding 81 percent of the project.
Dissatisfaction in governance
The recent decision of Demonetization and GST has not turned out that popular with the citizens and the government is facing its repercussions. This incident will distance the people further and the cumulative effect of all these negativity could reflect in the 2019 general elections. At the least, the opposition could use it in their favor now, to tarnish the Modi government’s image.