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Kobe Steel crisis deepens as plant inspected for breach of industrial law

TOKYO (Reuters) - One of Kobe Steel Ltd's <5406.T> copper plants was being inspected for a possible breach of industrial standards, the government said on Friday, while the company said it was investigating reports it continued shipping products after discovering widespread tampering of product data.

The inspection by the Japan Quality Assurance Organization started on Thursday, a company spokesman told Reuters by phone.

The industry ministry said the inspection was being carried out at a copper tube plant at Hatano, southwest of Tokyo.

If the company's products fail to meet industrial standards set by the government, it would be a breach of law, deepening the crisis at Japan's embattled third-largest steelmaker. Until now, the company had said products it sold with falsified data met safety and other standards but did not meet contract specifications agreed with customers.


Kobe Steel said it would hold a news conference later on Friday on the falsification.

Japan's third-largest steelmaker said on Oct. 8 that it found widespread falsification of data on the strength and durability of products sent to customers. The falsifications stretch back for more than 10 years, a senior executive told Reuters this week.

The company is now subject to a U.S. Justice Department probe while checks continue at hundreds of its clients involved in complex supply chains spanning the globe.

Global automakers, aircraft companies and other manufacturers have scrambled to identify potential hazards in their products because of the falsification.

The company has said no illegality had been found related to the data fabrication and no safety issues have yet been reported.

Kobe Steel is also checking into a Nikkei report that it continued shipping products with falsified data after discovering the cheating in August, the company spokesman said.

Government ministers waded into the fray on Friday, with one saying the government would take an active role in getting to the bottom of a scandal that is tarnishing the image of Japanese manufacturers.

"This is a problem between companies, but we want to be actively involved in the issues," Hiroshige Seko, minister of economy, trade and industry, told a news conference.

Transport Minister Keiichi Ishii also urged the company to investigate the falsifications and take proper prevention measures.

"It was extremely regrettable," Ishii told a news conference.

No safety problems have surfaced as Kobe Steel attempts to confirm the extent of the data tampering. But in Europe, aviation safety authorities earlier this week issued a directive advising aircraft manufacturers to avoid using Kobe Steel products if they can until checks are completed.

Four Japanese automakers said on Thursday they found no safety issues with aluminium parts supplied by Kobe Steel, allaying some concerns that falsified quality data on products from the steelmaker had compromised their vehicles.

Nonetheless, the company's fate hangs in the balance while checks are being carried out.

It must report to Japan's industry ministry by around the end of next week on any safety concerns and provide a more extensive account of the problems a fortnight later.

Kobe Steel shares fell 1.6 percent on Friday. They have fallen nearly 40 percent since it revealed the problems on Oct. 8, wiping about $1.60 billion off its market value.

Kobe Steel has an extensive role in global supply chains - the company produces engine valve springs found in half the world's cars, according to its website.

It also counts amongst its former employees Japan's Prime Minister Shinzo Abe, who worked at Kobe Steel from 1979 before entering politics in the early 1980s and who has pushed Japanese companies to embrace international corporate governance standards.

(Reporting by Ami Miyazaki, Yoshiyasu Shida, Yuka Obayashi and Sam Nussey; Writing by Aaron Sheldrick; Editing by Kenneth Maxwell and Raju Gopalakrishnan)